COMPARATIVE STUDY OF DEBT SERVICE PAYMENT AND ECONOMIC GROWTH RELATIONSHIP BETWEEN NIGERIA AND SOUTH AFRICA

Abstract

The study examined the effect of external debt service payment on economic growth in Nigeria. The study used annual time series data on real gross domestic product growth rate as proxy for economic growth being the dependent variable while external debt, debt service payment, ratio of external debt to export, ratio of external debt to GDP, ratio of external debt service to export, oil revenue and manufacturing sectors output were the independent variables. Autoregressive distributed lag model (ARDL) was used to achieve the objective. Comparatively, the study revealed that external debt service payment had negative impact on economic growth in Nigeria while external debt service payment had positive impact on economic growth in South Africa. The study concluded based on the findings that increased in external debt service payment led to decline in economic growth in Nigeria while increased in external debt service payment will led to increase in economic growth in South Africa within the study period. The study recommended based on the finding that Nigerian government should ensure that borrowing from the rest of the world is reduced to the barest minimum level in order to minimize the level of service payment in terms of borrowing so as to achieve the desired level of economic growth in the Nigerian economy while South African government should ensure that borrowing from the rest of the world is increased on the average with a moderate increase in external debt service payment in order to achieve the desired level of economic growth.