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External Debt, External Reserves, Debt Service Costs and Economic Growth: Implications for the Nigerian Transport Sector

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  • Osadume Richard C.

    (Nigeria Maritime University, Department of Marine Economics & Finance, Okerenkoko, Nigeria)

  • Ovuokeroye Edih University

    (Nigeria Maritime University, Department of Marine Economics & Finance, Okerenkoko, Nigeria)

Abstract

The objective of the study presented in this article is to examine the relationship between external debt (EXDT), external reserves (EXRS), total debt service costs (TDS) and Nigeria’s economic growth (RGDP) and how these variables impact on the Nigerian transport economy employing profligacy theory. The study used secondary data for Nigeria for the period 1979 to 2019 obtained from the International Debt Office (WBG). The econometric techniques used include OLS, Granger causality and Engle-Granger cointegration at a 0.05 confidence level. The results show that EXDT has a statistically significant negative relationship with EXRS, with no statistically significant relationship existing with RGDP and TDS in the short term. All the variables showed significant cointegration over the long term, with the conclusion that the relationship between EXRS and EXDT is negatively significant in the short term, while the other variables are insignificant. The recommendations of the study include, that the government and monetary authorities should endeavour to reduce the creation of foreign debt for nonreproductive projects in key sectors due to its adverse effect on external reserves, and instead pursue aid, grants and domestic long-term loan options necessary for effective growth of the transport and other key sectors of the economy.

Suggested Citation

  • Osadume Richard C. & Ovuokeroye Edih University, 2021. "External Debt, External Reserves, Debt Service Costs and Economic Growth: Implications for the Nigerian Transport Sector," LOGI – Scientific Journal on Transport and Logistics, Sciendo, vol. 12(1), pages 182-191, January.
    • Handle: RePEc:vrs:logitl:v:12:y:2021:i:1:p:182-191:n:3
    DOI: 10.2478/logi-2021-0017
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    References listed on IDEAS

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    1. Zahangir Alam & Muhammad Abdur Rahim, 2013. "Foreign Exchange Reserves: Bangladesh Perspective," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 2(4), pages 1-12, October.
    2. Yan Zhou, 2009. "International Reserves and Fiscal Policy in Developing Countries," Review of International Economics, Wiley Blackwell, vol. 17(5), pages 942-960, November.
    3. Md. Zahangir Alam & Muhammad Abdur Rahim, 2013. "Foreign Exchange Reserves: Bangladesh Perspective," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 2(4), pages 01-12, October.
    4. World Bank, 2020. "International Debt Statistics 2020," World Bank Publications - Books, The World Bank Group, number 32382.
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