NIGERIA’S EXTERNAL DEBTS: A LEGAL APPRAISAL OF THE IMPACT ON THE NATION’S ECONOMY

Abstract

External borrowing serves as one of the critical economic instruments adopted by governments to stimulate and sustain economic growth. Upon receipt, external loans transition into debt, which, if not effectively serviced, can accumulate and transform into what is often termed as "hangover debt." This phenomenon is particularly prevalent among underdeveloped and developing nations, where external debt is frequently relied upon as a strategic means to finance infrastructure, stimulate investment, and accelerate economic development. This study provided a comprehensive examination of external debt, exploring its definition, various classifications, and the multifaceted effects it imposes on national economies. Employing a doctrinal research methodology, the study meticulously examined the role of external debt in economic growth, weighing its potential benefits against its inherent risks. The findings reveal that while external debt can indeed serve as a powerful catalyst for economic expansion, its effectiveness is highly contingent upon the country's ability to service and manage the debt responsibly1. Mismanagement or failure to service external debt can lead to severe economic constraints, including increased debt burdens, reduced fiscal space, and heightened vulnerability to external shocks. Furthermore, the research highlights the dual-edged nature of external debt, emphasizing that while it can provide necessary capital for development, it also carries the risk of plunging a nation into a debt trap if not managed prudently. In light of these findings, the study strongly recommends that governments pursuing external borrowing as an economic strategy should establish robust debt management frameworks, implement comprehensive economic reform policies, and ensure that all borrowings are secured on sustainable terms. These measures are crucial to mitigating the risks associated with external debt and ensuring that it contributes positively to long-term economic growth.