TABLE OF CONTENTS Pages Title Page Certification Dedication Acknowledgements Table of Contents List of Tables List of Figures Abstract CHAPTER ONE

TABLE OF CONTENTS
Pages
Title Page
Certification
Dedication
Acknowledgements
Table of Contents
List of Tables
List of Figures
Abstract
CHAPTER ONE: INTRODUCTION
Background to the Study
Statement of the Problem
Research Questions
Objectives of the Study
Hypotheses of the Study
Significance of the Study
Scope of the Study
Organization of the Study
CHAPTER TWO: LITERATURE REVIEW
2.1Introduction
2.2Conceptual Clarifications
2.3Theoretical literature
2.4 Empirical Literature
2.5 Rationale for External Borrowing
2.6 Causes of External Borrowing
2.7 External Debt Management Strategies
2.8 Gaps in the Literature
CHAPTER THREE: RESEARCH METHODS
3.1Theoretical Framework
3.2 Model Specification
3.3 Sources of Data
3.4 Methods of Data Analysis
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Data Presentation
4.2 Analysis of Data and Discussion of Results
4.3 Policy Implication of Results
CHAPTER FIVE: SUMMARY, CONCLUSION, RECOMMENDATIONS
5.1Summary
5.2Conclusion
5.3Recommendation
5.4Contribution to Knowledge

Appendix 1
Related Research Studies in Nigeria
Appendix 2
Related Research Studies in Developing Countries
Appendix 3
Related Research Studies Countries
Appendix 4
Data 197O-2O15
Appendix 5
Indicator of External Debt Performance
Appendix 6
Over-parameterized Estimates for AGR
Appendix 7
Over-parameterized Estimates for SVR
Appendix 8
Unit Root Results
Appendix 9
Lag Order Selection Criteria
Appendix 10
Co-integration Test Results
Appendix 11
Long-run and Error Correction Results
Appendix 12
The over parameterized Estimated Results for Agricultural Sector Model 1 Appendix 13
The over parameterized Estimated Results for Service Sector Model 2

LIST OF TABLE
Table 42 Indicators of Trend Analysis 1970—2015
Table 4.3 Descriptive Statistics for AGR and SYR Model
Table 4.4 Unit Root Test Results at level
Table 4.5 Unit Root Test Results at first Difference
Table 4.6 Lag Order Selection criteria
Table 4.7 Unrestricted Co-integration Test Results for Equation 3.15
Table 4.8 Unrestricted Co-integration Test Results for Equation 3.17
Table 4.9 Long-run Estimates with AGR as Dependent Variable
Table 4.10 Parsimonious Error Correction Estimates for AGR Model
Table 4.11 Long-run Estimates with SVR as Dependent Variable
Table 4.12 Parsimonious Error Correction Estimates for SVR Model

LIST OF FIGURES
Pages
Figure 2.1 Debt Laffer Curve
Figure 2.2 Solow’s Production Curve
Figure 4.1 Graphical Indicator of Trend Analysis 1970-2015
Figure 4.2 Descriptive Graphs for Agricultural Sector Model
Figure 4.3 Descriptive Graphs for Service Sector Model
Figure 4.4 Cusum Test for Agricultural Sector Model
Figure 4.5 Cusum of Squares Test for Agricultural Sector Model
Figure 4.6 Cusum Test for Service Sector Model
Figure 4.7 Cusum of Squares Test for Service Sector Model

ABSTRACT
Over time, Nigeria has experienced increase in the external debt stock. Several studies have appeared in recent times on the negative impact of growing external debt on economic growth. This study proceeds to examine the impact of external debt on the growth of agricultural and the service sectors in Nigeria using time series data for the period of study 1970 – 2015. For this purpose, the study used co-integration being a test instrument and the error correction mechanism (ECM) to investigate the long-run as well as the short- run relationship among the variables used in the study. The empirical results reveal that external debt failed to yield increase in output returns in agricultural productivity by its inverse relationship with agricultural output and this is contrary to our a priori expectation. This indicates that the acquired external loans to agriculture within the period of study were not optimally utilized. However, in the service sector estimate, all the variables i.e. external debt, exchange rate, government expenditure on service sector and external debt service indicate a direct relationship with the service sector implying increase in output return in the service sector performance. In view of these findings, the government should demonstrate sound commitment to effective debt management in order to ensure that the loans obtained from the foreign creditors are properly channeled and well utilized for the growth of the agricultural and the service sectors so that the output returns would be adequate for debt service obligation and promote economic growth in Nigeria.

CHAPTER ONE
INTRODUCTION
1.1Background to the Study
There is no country in wcrj4 whose aims are not geared towards achieving economic growth and development. However, this can be possible if a country has resources at its disposal. In many developing countries, with particular to Nigeria, the resources to finance the optimal level of economic growth .development are in short supply. This is because of the economies of these countries plagued with problems associated with low domestic savings, low productivity, tax revenue and limited foreign exchange earnings (Adesola, 2009). As a result, country inevitably resorts to external borrowing to finance the gap between the resources available and what is required for growth and development.

Therefore, external debt can be defined as loans obtained from the foreign creditors. Foreign creditors represent external bodies from whom loans are obtained are Paris Club of creditors, London Club of creditors, representing financial banks mainly in industrial countries, the multilateral creditors, mainly the world Bank, International Monetary Fund (IMP), African Development Bank (ADB), European Investment Bank (EIB), International Development Association (IDA) and international Fund for Agricultural Development (IFAD) to finance the excess of government expenditure over its revenue. A greater proportion of external loans were obtained to support agricultural expansion and the construction of railways in the service sector (Obadan, 1996). An increase in agricultural output will lead to a rise in export which in turn would generate returns for: debt repayment and promote economic growth and development.

External debt, capital flight and low output .lave remained our development problem. In Nigeria, these have grown higher with cumulative stock of capital flight markedly exceeding the stock of external debt (Ndikumano ; Boyce, 2008). All countries regard economic growth and development as their primary objective. This objective embraces the need to raise the income, increase output and the standard of g of the people. In order to attain this objective, there must be a rise in national or capita income and a rise in output resulting from an increase in the production of goods and services in the country (Itesede, 2005). The goods and services must be channeled to satisfy the basic needs of the peoples. Since the scale of production can only be increased in the long run, economic growth is considered a long run phenomenon (Kibritcioglu ; Dibooglu, 2001).

We can define economic development as a process of increasing the living standards of the people through the efficient and sustainable allocation of scarce resources However, economic development connotes economic growth with structural change. The principal goal of developments policy is to create sustainable improvements in the quality of life for everyone. Raising per-capita income and consumption is a part among other objectives for reduction of poverty, expansion of access to health service and qualitative education. These require a comprehensive approach to development.

While economic development concentrates on the transformation of economic structure and institutions, the study of economic growth emphases the use of mathematical models that describe the quantitative relationship between economic variables. The Nigeria external debt and its impact on growth of the economy in the recent past can be traced to the early 1980s which was the aftermath of the occurrence of the oil price increase of the 1970s. Therefore, this study reviews some relevant literature on external debt in developed and developing countries.

The purpose of external borrowing has not been achieved in Nigeria over the years. The unfortunate thing about Nigeria debt crisis is that the country is characterized by poor leadership and followership (Nyong, 2001). This has caused high poverty, illiteracy and unemployment in Nigeria over the years.

Smith (1976), asserts that economic growth is a suitable starting point for our discussion, maintaining that accumulation of capital, technical progress as well as social factors play a crucial role in acceleration: of the economic growth and development of every country. The neoclassical growth theory developed by Solow (1956) focuses on capital formation as a driving force for economic growth. However, due to decreasing marginal returns in substituting physical capital for labour, the accumulation of capital would not definitely support steady rate of growth.

Objective of external loan is to enhance capital formation in the economy. Adepoju. et al (2007), notes low pace in development is characterized by inadequate internal capital formation resulting from vicious circle of low productivity, low savings and low income. Hence, this calls for technical change, managerial and financial support from western countries. External debt accumulates because the servicing requirement is not the friendly type. In this regard, external debt becomes a self-perpetuating mechanism of’ poverty aggravation, work exploitation, and a constraint to development in developing economies (Nakatami & Herera, 2007).The growth model demonstrated by Solow (1956) explained the long run growth path of developed capitalist economies in terms of accumulation of capital and technological progress. The sole concern of this model is the growth in income. External debt has constituted a burden on Nigerian economy because contracted loans were not optimally deployed. As a result, the returns on investment have not been adequate to meet maturing obligations and leave the balance to support domestic economic growth. Lack of sufficient domestic resources which result to a situation where resources from external transactions are not enough to promote domestic economic growth and development, and simultaneously meet external debt obligations, thus the problem of debt servicing will ensue and invariably lead to debt overhang. This is a major barrier to economic development in Nigeria. Although a greater proportion of Nigeria debt has been incurred for development purposes but the loans were not fully invested in growth generating ventures. Hence, the growth has been low, and unfortunately the ability to service the loan became a problem. The problem was further aggravated by the large number of big projects resulting from over ambitious development plans and this has negatively affected the development in Nigeria.

External indebtedness in Nigeria not only has a negative effect on the growth of Nigerian economy, but also derails efforts at economic recovery increase in production and market enhancing initiatives of government ( Nwankwo, Richard &Nwanna,2003). Much of the resources that could have been used in order to generate increase in output were used to service debt. The same is applicable in many other developing countries. For example, of the forty-four (44) identified by the World Bank as heavily indebted poor countries thirty-three (33) are in Sub-Sahara Africa (Fosu, 2008).

The benefit associated with foreign borrowing is that it makes resources available to the debtor nations for the purposes of economic growth and development. The debt requires payment of principal and accumulated interest which is referred to as amortization for the period of the loan. The burden of the debt service is therefore determined by the size of the debt and its associated interest.

For the fact that foreign loans are usually contracted in foreign currency, payment for amortization must also be made in foreign currency. Put differently, payment for amortization is made using foreign or export earnings. In any case, difficulties may occur in a situation where the export earnings reduce or where the interest rate rises, this therefore requires more export earnings to meet the agreed obligations. This has been the situation of many heavily indebted countries.
The Nigerian economy has passed through some considerable strains. The pressure has been evident in the incessant deficits in our balance of payments, The poor structure in the economy as indicated in the over dependence on foreign change earnings from oil, over reliance on foreign inputs for productive activities and declining terms of trade on its non-oil exports accounts for a situation in which the government often seeks for foreign loans in order to bridge its foreign-trade gap (M-E) meaning export falls short relative to import and investment-saving gap (I-S) which also implies savings fall short relative to investment.

In spite of the economic reforms since 1986, Nigeria has only recorded growth rate of 3 percent from 1980 to date and with the persisted budget deficits. More also, Nigeria continues to experience bad economic conditions that encourage high levels of external borrowing. Therefore, country has been in debt -servicing in spite of debt reliefs rescheduling and restructuring, Nigeria’s debt problem remained increasing. The external debt-service reduces savings and foreign exchange earnings that could have been used for domestic production. Therefore, external debt service is the portion of current revenue used in settling past expenditure and is not available to the domestic economy for consumption and or production in the current period. The implication is that the external debt burden will have a negative effect on the present and future economic growth and development. The economic performance in Nigeria needed to bring about economic growth, has been unsatisfactory since the early l980s. The primary objective of this study is to examine the impact of external debt on the growth of agricultural and services sectors of the Nigerian economy. The study also aims to evaluate the impact of government expenditure on agriculture, government expenditure on service sector, external debt servicing, and exchange rate on the growth of agricultural and service sectors of the Nigerian economy.

1.2 Statement of the Problem
Economic growth remains a fundamental requirement for development. This accounts for the reason why economic growth in Nigeria continues to dominate as the main thrust of government’s development objectives. Importantly, economic growth is accompanied with policies aimed at transforming the main sectors of the economy which involves agricultural and the service sectors in order to achieve developmental goals. The inadequate domestic resources to support the long-run growth have remained a major barrier hindering economic development in Nigeria.

In this regard, a greater proportion of Nigeria external debt was incurred for development purposes, but the loans were not optimally utilized to generate the required growth. This problem was further aggravatd by the large number of big projects involved as a result of over-ambitious development plans which negatively affected the development in Nigeria (Obadan & lyoha, 1996).

In spite of a number of economic reforms embarked upon in Nigeria over the years, the country has only recorded low rate of growth causing budget deficits. The low level of economic conditions in Nigeria encourages high levels of foreign borrowing. Unfortunately, the acquired loans failed to yield a rate of return which is higher than the cost of borrowing that would have enabled the debt repayment. Therefore, the country has been in debt service problem. In spite of the debt relief initiatives such as debt restructuring and rescheduling the Nigeria’s debt problems still persist.

External debt servicing reduces its domestic savings and the amount of foreign exchange earnings that would have been used for domestic production and the provision of services for the increasing population. The greater the proportion of foreign exchange earnings allocated to service external debt the lesser the resources available for other development —oriented projects (Obadan ; lyoha, 1996). Moreover, the amounts of debt stock accumulated by the country have continued to discourage the inflow of foreign resources through foreign direct investment because foreign investors do not have the confidence on Nigeria tax policy and other macroeconomic policy issues.

In the same vein, more than 70 per cent of Nigerians live below the poverty line because the resources that could have been used to finance education, health care service delivery and other infrastructural facilities in order to achieve employment possibility were used in debt service payments. The public-sector investment, which provides employment for the citizens, has fallen considerably because of the external debt burden (Nwanna, Richard et al, 2008).

The Structural Adjustment Programme (SAP) failed to yield the satisfactory result in line with its objective and the Nigerian economy still remains weak and not fully transformed to sustain accelerated growth and development. As a result of this, the gover1ment has continued to borrow, hence the total debt stock in 2003 and 2004 was almost equal to the gross domestic product (GDP) and the cost of debt-service relative to Nigeria export earnings exceeds 25 per cent of its foreign export earnings.

In line with the work of Ijeoma (2013) which empirically examined the impact of external debt on the Nigerian economy for the period 1980 to 2010 using the Ordinary Least Squares (OLS) estimation technique, the study made use of external debt (EXD) and exchange rate (EXR) on the national output (Y). Our study then incorporates government expenditure (GEX), and external debt service (EDS) into the adapted economic model of Ijeoma (2013) and applied the error correction mechanism (ECM) estimation technique. The choice of the variables is considered relevant because an increase in government expenditure in agricultural and service sector could lead to a rise in foreign exchange earnings which in turn could lead to an increase in national output, thereby reducing the need for external borrowing. The ordinary least squares (OLS) estimation technique as used by Ijeoma (2013) never involved the co-integration test to ascertain the long-run equilibrium relationship among the variables used in his model, hence our study considered co-integration test necessary as it helped to obtain the long-run equilibrium relationship and it also remained a sufficient condition for an Error Correction Mechanism (ECM) formulation (Granger ; Engle 1985). In addition, our study considered ECM estimation technique important because it enables us to obtain the short-run behavior of the variables and the speed of adjustment to its long-run value.
In addition, Ekpo and Egwaikhide (1998) and lyoha (1996) studied the impact of 4 on the economic growth in Nigeria. Moreover, Obadan (2004), Adesola (2009), Adegbite et al (2008), Ndubuisi (2011), Ijeoma (2013) etc whose work have been reviewed in the empirical literature examined the impact of external debt on the economic growth in Nigeria. The impact of external debt on agricultural output and the service sector in Nigeria was not considered hence our study examined the impact of external debt on agricultural and service sectors in the Nigerian economy.

1.3 Research Questions
What is the impact of external debt on agricultural sector in Nigeria?
What is the impact of external debt on the service of the Nigerian economy?
Does government expenditure on agriculture have any impact on agricultural sector in Nigeria?
Does government expenditure on service sector have any impact on service sector in Nigeria?
1.4Objectives of the Study
The overall aim of the study is to examine the impact of external debt on agriculture production and the service sector in Nigeria. Other objectives are to:
Examine the impact of external debt on agricultural output and the service sectors in Nigeria.

Assess the impact of exchange rate on agricultural output and the service in Nigeria.

Evaluate the impact of government expenditure on agricultural output and the service sectors in Nigeria.

Examine the impact of external debt service on agricultural output and the service sectors in Nigeria.

1.5Hypotheses of the Study
Ho:External debt stock does not significantly affect agricultural output and the service sectors in Nigeria.

Ho:Exchange rate does not significantly influence the agricultural output and the service sector in Nigeria.

Ho:Development expenditure on agriculture and the service sector does not significantly affect agricultural output and the service sector in Nigeria. Ho:External debt service does not significantly affect agricultural output and the service sectors in Nigeria.

1.6Significance of the Study
The results of this study should equip the policy makers to have gratifiable assessment of the impact of the foreign borrowing allocated to the agricultural sector on the level of agricultural production in the Nigerian economy. This will in turn bush a link between external debt and economic growth as well as poverty nation. The results of this study will also enable the policy makers to assess the impact of external loans allocated to the service sector on the service sector performance.

The result of the study of the impact of government spending on agriculture on of agricultural production will enable the policy makers to gauge the pace of agricultural production through fine-turning budgetary allocation to the sector. This could be very crucial to government policy of accelerating growth and poverty in. Since growth in agriculture and the service sectors are relevant in the economy, our findings should equip the policy makers to achieve the growth targets, hence the study contributes to the development strategies and policies that help to promote economic growth in Nigeria.

This study adds value to the growing empirical literature on external debt by the Engle and Granger (1987) co-integration analysis and error correction mechanism (ECM) to examine the long-run and short-run relationship between growth in agricultural output, service sector and external debt.

1.7Scope of the Study
The study covers the period between 1970 and 2015. It examines the different macroeconomic measures put in place to tackle the external debt issue during this period in Nigeria. The study focuses on the following variables: external debt, agricultural output, services sector, external debt servicing, government expenditure agriculture, government expenditure on the service sector and exchange rate.

1.8Organization of the Study
The study is divided into five chapters. Chapter one takes a look at the to the study and also covers statement of the problem, research question, of the study, hypotheses of the study, significance of the study, scope of the organization of the study. Chapter two focuses on the review of related Chapter three deals with the research methods and theoretical framework. Chapter four takes data presentation, analysis of data and discussion of results. Chapter five contains summary, conclusion, policy recommendations and contribution.

CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
In this chapter, the review of the related literature is undertaken. It involves issues that border around where the problem comes from, what is already known about the problem, what methods have been used to solve the problem. This review is carried out under the following headings: (a) conceptual clarifications, (b) theoretical literature, (c) empirical literature, (d) rationale for external borrowing, (e) causes of external indebtedness, and (f) -debt-management strategies.

2.2CONCEPTUAL CLARIFICATIONS
Obadan (2004) suggests that one of the means put in place by the Federal Government of Nigeria to complement strategies for debt management is Debt Conversion Programme (DCP). This was established in 1988 for the implementation of the. programme. Therefore, debt conversion remains an element of debt relief strategy. In a broad sense, debt conversion is the exchange of monetary instruments (e.g. promissory notes for tangible assets or other financial instruments). It is a mechanism for reducing a country’s external debt by altering the character of the debt. The conversion comes in various forms, including debt for equity and debt for cash.

Under debt conversion, a credit contract with firmly agreed conditions of repayment is replaced by a relatively more flexible arrangement with a variable debt service obligation. The main objectives of the debt conversion programme were to:
Reduce the external debt stock and lighten the debt service burden.

Encourage capital inflows by attracting foreign investors by improving economic environment;
assist in the repatriation of flight capital and this would give rise to increase in investment and generate employment opportunities.

External debt involves borrowing which arises from the need to finance the excess of government expenditure over its revenue. External borrowing complements domestic savings in order to make possible higher rate of capital formation or investment. External borrowing plays an important role in filling investment-saving gap and import-export gap or a foreign exchange gap. The borrowing is referred to as external debt because; the loans were obtained from foreign creditors such as the Paris Club, London club of creditors. The external debt burden has been very serious and disturbing owing to its burden. For example, as indicated in table 2. 1(appendix 5), the total external debt/export ratio, which measures proportion of debt to export earnings, stood at 19.8 per cent in 1970 and later dropped to 4.9 per cent in 1977. It experienced an increase in 1980 by 13.16 per cent 464.7 per cent in 1986 and then dropped again to 225.5 per cent in 2002. The proportion of debt to export earnings of 10.9 per cent was recorded in 2014.The external debt service ratio also recorded 8.3 per cent in 1970 then dropped to 0.78 per cent in 1980 and further sose again from 4.7 per cent in 1981. However, 9.4, 17.8 and 9.1 per cent were also recorded in 1982, 1983 and 1984, respectively. This implies that over time more and more export earnings were utilized to service external debts, leaving a lower proportion for other uses.

Debt Rescheduling was implemented to reduce the debtor’s country debt profile and make its foreign debt more manageable. The preponderance of short-term debts in Nigeria’s debt profile and especially the bunching effect of these between 1986 and 1989 put necessary pressures on the country’s reserves and on its ability to meet its obligations. The architects of the Structural Adjustment Programme identified that Nigeria would carry a heavy debt servicing in the medium-term, hence it needed to reschedule in order to have a breathing space until foreign exchange earnings improve. The government had to pursue an aggressive diplomacy to reschedule the debts. It is not intended to reduce the total debt outstanding until the debt has been finally and fully repaid. -The rationale for debt rescheduling is to buy time. In a situation where the debt problems are due to temporary foreign exchange shortfall, rescheduling allows time for balance of payment to improve. On the other hand, where the problem is fundamental, rescheduling lightens the country’s burden and gives time for appropriate measure which becomes necessary in order to improve the balance of payment position.

In line with Oke (1990), under the rescheduling arrangement of 1988, all debts owed to the London Club were consolidated and rescheduled for over twenty (20) years starting from 1989 with a grace period of three (3) years. Also, in 1989, when there was payment of arrears, there came another rescheduling. In line with this, a three-stage repayment schedule was formed i.e. 1989-1991 for debt payable, 1992- 1993 to refinance letters of credit and 1992-2008 for medium and long debt. In like manner, arrangement was signed with Parish Club of creditors for bilateral rescheduling of debts.

The significance of rescheduling is that without it the country’s service ratio would have been high and this would result to an intolerable strain on the economy. In fact, within 1986-1991, there was debt rescheduling totaling US $19.3biillion with London and Parish Club of creditors and received debt cancellation of US $100.4 million from the government of Canada and United States. The agreement negotiated with the London Club allows Nigeria to buy back about 63 per cent of the debt owed to commercial banks thus reducing the debt stock by about US $3.29billion.

A situation where resources from external transactions are not enough to promote domestic economic growth and development, and simultaneously meet external debt obligations, the problem of debt servicing will ensue and invariably lead to debt overhang. This is because the expected interest payments are positive function of output and this will lead to investment decrease, because their return will be taxed away by foreign creditors and the pace of economic growth will slow down (Krugman, 1988 ; Sachs, 1989). Krugman (1998) constructed a model of debt overhang in which he considers the dilemma of debt repayment from the creditors’ point of view. He argued that a country would have debt problems when its own discounted value of all future resource transfers is less than the present value of debt. Facing these problems, the creditors try to find such a strategy which would maximize the present value of the debt. This strategy takes into account the trade-off between debt forgiveness and further financing of the country so that the present value of the debt should be comparable with the present value of the future countries’ earnings. This in turn implies that the returns from investments in the country will face a high marginal tax demanded by creditors; this encourages low level of current and future investments. When this happens, the problem of debt servicing ensues and invariably leads to debt overhang. Debt management therefore ensures that measures and strategies for dealing with the actual or potential problems associated with public debt are in place. The key preliminary element of the strategy is monitoring.

Debt service payment refers to a situation whereby a certain proportion of export earnings are set aside to meet debt service obligation in order to allow for internal development. In this regard, state governments were required in 1980 to spend not more than 10 per cent of their total revenue on debt service payment. The Federal Government allocated 30 per cent of export earnings for external debt servicing. For clarification, in a symposium organized in 1998 by the World Bank, Cuddington (1998) acknowledged the detrimental impact of external debt service payment. For instance, country with large service sector, he suggested would adjust better than countries with large external debt service obligations. The greater the proportion of foreign exchange earnings allocated to service external debt the lesser the resources available for other development oriented projects.

Under the debt buy back, the debtor country is allowed to retire debt at discount by paying cash to the creditor country, while the unpaid debt is restructured. Ndiulor (1991) states that Nigeria saved about $2 billion of the country’s $5.6 billion debt to • the London Club of creditors in a debt buy back deal. Nigeria was able to strike a deal to purchase at 40 per cent on each dollar of the $3.5 billion debt, thereby paying $1.32 billion instead of $3.3 billion. By implication, Nigeria gained 60 per cent on each dollar of the $3.3 billion debts and savings amounted to $1.98 billion. The remaining debt was exchanged for collateralized ‘per bonds’ which would attract an interest of 5.5 per cent for the first 3 years and 6.25 per cent for the remaining 27 years of the debts ‘settlement.

The works of early development economists such as Domar (1957), Higgins (1959), Pearson (1969), Symonds (1970), Chenery (1966) and Strout (1966) provide a foundation for the development of a comprehensive theory of external debt and growth. They all share a common view that the transfer of foreign resources (through loan, aids and grants) to less developed countries will help to transform their economies, characterized by low or zero growth rates, into economies capable of adequate and sustainable growth. Their contributions show that the transfer of foreign resources to developing countries is necessary and serves to supplement domestic resource gaps with positive effects on their economies. The consequence of the foregoing is that a strand of thought runs through the early contributions on external debt and economic growth: “reasonable levels of borrowing by a developing country are likely to enhance its economic growth”. Countries at early stages of development have small stocks of capital and are likely to have investment opportunities with rates of return higher than those in advanced economies. As long as they use the borrowed funds for productive investment, growth should increase and allow for timely debt Ants. This explains the short-term positive relationship that exists between debt and growth for countries that will glide through the debt cycle within le time.

The relative importance of the long-term effect of external debt on growth has motivated the formulation of a comprehensive theory of external debt and economic growth. The major theory that explains this long-term effect is the debt overhang hypothesis. A graphical explanation of this theory became known as the debt Laffer curve. In order to proffer a solution to the debt overhang problem, which is clearly understood by the existing theories, economists shifted their attention towards finding optimal debt stock for any nation. Hence Laffer curve explains the level of debt that a country can sustain without having a debt overhang problem or in other words without being trapped in the debt cycle. A very important deduction that can be made worn the debt Laffer curve is that there is an optimal level of debt that a nation can sustain without having a debt overhang problem. This point is represented by the peak debt Laffer curve. Sachs (1989), introduced the concept of the debt Laffer curve through the theory of debt overhang. This curve reflects a situation where high debt results in efficiency losses.

Among other factors which impose efficiency losses include heavy marginal which can be imposed on the future returns to current investment which will give to disincentives for fiscal adjustment and investments.

Figure 2.1 Debt Laffer CurveAlong the left side of the curve, inrcse in the face value of the debt service are associated with increase in expected resource transfer, while increase in the face value beyond point ‘E’ lower expected repayment. Additional amount of debt actually decrease expected payment. At that stage a country is said to be on the wrong side of the debt laffer curve.

Calvo (1998) encounters three distinct debt areas, in the first area growth is an increasing function of debt; the second area is an intermediate region where an economy exhibits either high or low growth path and the third area is where growth is a decreasing function of debt. According to him high levels of initial debt would be associated with high tax burden in order to service the debt. Consequently, a lower rate of returns on investment will result. At the same time a high economic growth reduces tax rate needed to service debt. In the case the critical value of debt is exceeded, the economy settles in a region of low growth. If the economic growth is lower than debt, the tax burden will become high and the rate of capital accumulation will becomes low as well, which in turn give rise to low growth. At the same time, if the economy is in indeterminacy region a relatively modest cut in debt can lead to growth increase.

Debt cancellation involves the outright write off of certain outstanding debt by the creditors of amounts owed to them. This is regarded as the last resort measure and is seldom and reluctantly used. It becomes necessary when the debtor country faces bankruptcy i.e. its economy is sick and is in verge financial collapse or when a new take is considered necessary for the interest of the nation. Debt cancellation would serve as a solution to the debt problem by substantial reduction in the total level of indebtedness. This approach is considered very important for debtor countries. Nigeria recently adopted the approach in debt negotiations with London and Parish Club of creditors’ nations. This strategy was vigorously pursued by Obasanjo administration but yielded little or no result. Debt cancellation arrangement can be seen as a new political signal of the communities’ willingness to assist the world poorest nations. United Nation Conference on Trade and Development (TJNCTAD,2004), notes that debt cancellation would also help to raise the inflow of measures to an adequate level in cases where the volume of new lending was inadequate, it would do so without creating additional pressure for softening of the terms for new lending.

2.3THEOTICAL LITERATURE
Solow’s Production Function
In production, output largely depends on inputs and hence, growth in output may also depend on input growth. The performance of the agricultural sectors depends to a large extent on the environmental factors of a given nation in addition to the factor inputs. For instance, if the required factor inputs for a particular type of agricultural activity are made available, the environmental factors would determine their utility rate and the efficiency of allocation and this will of course impact on the production function as well as the level of output. Some inputs are measurable, others may be qualitative, and these principles are indicative in Solow’s (1957) accounting growth theory. The growth accounting model breaks down the growth rate of the output into growth of the contributing inputs, such as labour, capital and technical progress. Solow’s production function based on Hicks-neutral technical change may be expressed as:
Q=A (t)f(K,L) …………………………………… (2.1)
Where:
Q represents output; A (t) represents the technical change or progress; K represents capital input and L represents the labour input. Modification of Solow’s growth model resulted to endogenous growth models. The modern endogenous growth theories explain the long-run growth rate of a given by extending the neoclassical growth theories, whereby endogenous rate of progress is introduced. Proponents of the modem endogenous growth theories include Arrow (1962), Rumer (1986), and Lucas (1988). Romer (1986) model, a variant of Arrow’s (1992) .model, entails some relevant issues to this study is therefore presented below. Romer’s (1986) model which takes knowledge- as a factor input in the production function may be expressed as below:
A(r)f(R, K, L) …………………………………………..(2.2)
Where: Y represents output; A represents public stock of knowledge from research study and development; R is the stock of results from the expenditure on the research and development study; K, represents capital stock and L is the labour stock. In Romer’s model, the major determinant of long-run growth is the body of new knowledge by investment in research technology. Some implications of the Romer’s model that can be drawn for this study include the term A which he refers to as the public stock of knowledge from research and development which enhances the efficient and effective combination of factor inputs in production. This will eventually to increase in output.

In addition, growth is determined by the saving decisions as all savings are vested and become part of capital stock (lyoha, 2000). Solow (1957) established the theorem below:
If savings ratio is constant and production is subject to the neoclassical conditions ie production function is assumed to be linearly homogeneous to exhibit constant returns to scale, the economy will move asymptotically to a golden age. This theorem implies steady state growth path in which labour, capital and income all grow at the same constant proportionate rate. To that extent, income (Y) grows at a constant exponential rate, g’ then
Y=Y0egt…………………………………….(2.3)
Note that the rate of growth of income which provides lull employment must also be Therefore, income must be growing at the natural rate, or
g=n…………………………………….(2.4).

Assume that at the level of output which the economy is capable of producing is proportional to the capital stock K, thus the production function is given by
Y=f(K)…………………………………….(2.5).

Where Y Is output, K is capital stock. A constant proportion of income is saved; the savings forthcoming schedule is given by
SY=sf(K)…………………………………….(2.6).

The required saving or investment needed to maintain capital intensity when the growth rate
g=gk…………………………………….(2.7).

equilibrium occurs when the amount of savings, people are willing to undertake Is the required amount needed to keep capital intensity constant. Therefore ‘E’, section of gk and sf(K) gives the steady state equilibrium and Ke gives the equilibrium capital intensity. The point ‘E’ is unique and stable and this can easily be
Specifically, if ‘K’ is to the 1eft of ‘I (‘ as in figure 2.2 below, Savings forthcoming exceeds required savings, and there is tendency for the capital intensity
However, if ‘K’ is to the right of Ke, required savings to maintain capital exceeds savings forthcoming and there is also tendency for capital intensity In either case, equilibrium requires that savings forthcoming be equal investment needed for capital widening ie
Figure 2.2 Solow’s Production Curve

Source: Iyoha, 2000
The figure 2.2 above shows the reduction in capital from Kd to Ke and output from Yd to Ye as a result of crowding out effect of external debt on the economy ie the shift of production function in Solow growth curves downward.

Given the Solow model, the rate of change of the capital stock per unit of labour is the difference between the two terms. The first sf(K) is the actual investment per unit of labour; output per unit of labour f(K) and the fraction of that output that is vested is S.

The second term ‘gk’ is break-even investment, the amount of investment that must be done first to keep ‘K’ at its existing level. There are two reasons: some investments are to prevent ‘K’ from falling. First, existing capital is depreciating and must be replaced from keeping the capital stock from falling. Second, the quantity of labour is growing, thus doing enough investment to keep capital stock ‘K’ constant is not enough to keep the capital stock per unit of labour constant instead, since the quality of effective labour is growing at rate gk to hold K constant.

When actual investment per Unit Of labour exceeds the investment required to break-even ‘K’ is rising. When actual investment falls short of break-even ‘K’ is falling. When the two are equal ‘K’ is constant (Romer, 2001).

Economic growth can also be traced to under mentioned neoclassical economists who are regarded as the pioneer of economic growth. They analyzed economic growth with rigorous model. These neoclassical economists are Solow (1957), Schumpcter (1934), Ramsey (1928), Harrod (1939), Domar (1946) and Knight (1994). The economic growth theories which are today known as endogenous growth theories were initiated by Romer (1986) and Lucas (1988).

Economic growth theory explains the rate at which a country’s economy grows over time. It is always measured as the annual percentage rate of growth of the country’s major national income accounting aggregates, such as the gross domestic product (GDP) or gross national product (GNP) with appropriate statistical adjustments to discount the potentially misleading effects of price fluctuation (Johnson, 2000). Emphasis is on analyzing and explaining the variations in the long- term trend or average rate of economic growth over longer period of time.

However, the theoretical underpinning of this study centers on the Dual Gap Theory The dual gap analysis-explains-that-development is a function of investment and that such investment requires domestic savings which is not sufficient to ensure the required investment that would enable development to take place. Therefore, there must be the need to obtain from abroad the amount that can be invested to fill the gap. Moreover, if the domestic resources are to be supplemented from abroad, such as excess of import over export
That is
I-S-M-E
Where M = import
E=export
I = investment
S = savings
In national income accounting, an excess of investment over domestic saving is equivalent to excess surplus of import over export.

Omoruyi (1996) stated that most economies experienced a shortfall and in trying to bridge the gap between the level of savings and investment, have resorted to external borrowing in order to fill this gap. The dual-gap analysis provides a framework that shows that the development of any nation is a function of investment and that such investment requires domestic savings which is not sufficient to ensure that development takes place (Oloyede, 2002).

In the same line, Harrod-Domar growth model uses mathematical equation to demonstrate the existence of a direct relationship between saving and the rate of economic growth and indirect relationship between capital and economic growth. The model integrates Keynesian analysis of economic growth which assumes that economic growth has a direct effect of capital accumulation in the form of savings. The Harrod-Domar growth model is used to estimate the financing gap of a developing economy, assuming that there is abundant labour supply, with scarcity of capital being the only constraint to production (Jhingan, 1997). The model assumes that growth is proportional to the rate of investment. This implies, growth is equal to investment divided by the incremental capital output ratio. By inference, if a target growth rate is set, the required investment to meet the target can be estimated by multiplying the target by the incremental capital output ratio.

The financing gap is the difference between the available financing for investment and the required investment needed for growth. By a way of filling the difference (gap), foreign capital such as foreign loan or aid is needed byà àountry to achieve the required investment that would yield the target growth rates. Empirical evidence fails to support this theory because the massive external loans received by developing countries have not yielded increase in economic fortunes (Chenery ; Strout, 1996).

Economic literature indicates that reasonable levels of external borrowing by a developing country can bring about economic growth through capital accumulation (Todaro ; Smith, 2006). This in turn leads to convergence of per capita income between nations (Barro et al. 1995; Poirson ; Ricci, 2004). Countries at early stage of development with small stock of capital are likely to have investment opportunities with higher rate of return. The low level of savings in developing countries is associated with low income and this would need to be supplemented by foreign resources. As long as these countries use the loans for productive investment and do not succumb to macroeconomic policies that distort economic incentives, growth would increase and this allows debt repayments (Pattillo, Poirson ; Ricci, 2004).

2.4EMPIRICAL LITERATURE
Economic literature abounds with view on the importance of external borrowing which provides the dynamic part of a monetary economy, and is considered necessary for economic development process (Kuznets 1965). As has been noted by Ndekwu (1983; 1990) and Okoh (1993), a well-organized credit or debt system provides the foundation for a sound financial system and growth of an economy. To support this view, it is also observed that the economies of Western Europe and America thrive on credit system, but their level of debt is closely monitored to avoid any damage to the financial system and economy.

However, external borrowing plays an important role in supplementing domestic resources to meet a country’s set objectives (Todaro, 2006). Apart from supplementing domestic savings, external resources inflow provides a country with foreign exchange needed for balance of payments (BOP) support, project financing, to import the necessary machinery and technical expertise for the attainment of economic growth and development (Nowzad, 2003).

Soludo (2003) opined that countries borrow for two broad reasons: macroeconomic reasons higher investment, higher consumption (education and health) or to finance transitory balance of payments deficits to lower nominal interest rates abroad, lack of domestic long-term credit, or to circumvent hard budget constaint5l. This implies that economy indulges in debt to boost economic growth and reduce poverty. He is also of the opinion that once an initial stock of debt grows to a certain threshold, servicing them becomes a burden, and countries find themselves on the wrong side of inability to service the debt which will lead to crowding out investment and growth. This seems to be the position of Nigeria today because investment, which will accordingly result to high-speed growth with a positive effect on poverty, is moving sporadically in both positive and negative directions. Uniamikogbo (1991) states that Nigeria has started again to mount up debt. The magnitude of the debt and increasing debt services (amortizations and interest payments) have become of great concern to the Nigerian government. The government in its continuous effort to solve the external debt problem embarked on measure such as debt conversion, debt rescheduling, debt services, debt restructure, debt buy back, debt cancellations e.t.c. This notwithstanding, Nigeria has remained one of the heavily indebted countries in the world, and has not enjoyed impressive economic growth as she continues to pay huge interest on her indebtedness
Adesola (2009) carried out a study to examine the effect of external debt service payments on the economic growth in Nigeria by using ordinary least square multiple regression technique for his analysis. From the results, It was found out that debt service payments have negative impact on economic growth.

Adegbiteet al. (2008) examines the impact that Nigeria’s huge external debt stock had on its economic growth between 1975 and 2005. They use a Solow-type neoclassical growth model to regress the ratio of external debt to gross domestic product (along with several other macroeconomic and external sector exogenous variables) against the annual gross domestic product growth rate. Using both ordinary least squares and generalized least squares and estimating both linear and non-linear relationships, they study the debt overhang theory for Nigeria. Their results find that external debt contributes positively to growth up to a certain point, after which its contribution becomes negative. They also investigate the “crowding out” effect of debt servicing by regressing debt service requirements against private investment and find that Nigeria’s large debt burden did indeed “crowd out” private investment.

In another study carried out-by-Ndubuisi (2011) on the Effect of External Debt Relief on Sustainable Economic Growth and Development in Nigeria using Chisquare, Regression and Correlation analysis to test the relationship between external and internal debt stock in relation to debt relief, the study found out that there is a relationship between external and internal debt stock in relation to debt relief, that debt relief affected the economic growth of the economy and that gradual reforms and investments will help to bring back a healthy economy for the nation.

Ijeoma (2013), empirically examined the impact of external debt on the Nigerian economy for the period 1980-2010 using ordinary least squares estimation technique. The results found out that Nigeria’s external debt stock has a significant effect on her economic growth. It also revealed that there is a significant relationship between Nigeria’s debt service payment and her gross fixed capital formation. The study therefore recommends that government should go for borrowing as much as possible. However, since developing countries need to borrow at one time or the other to supplement internal savings, borrowing then should become an option only when high priority projects are being considered and borrowed funds should be strictly monitored to ensure that the1oans are used for the purpose for which it is borrowed.

In a study carried out by Ogunmuyiwa (2011) where he examined the effect of external debt on economic growth in Nigeria using time series data froml97O-2007 fitted into a regression equation. The results obtained indicate that causality does not exist between external debt and economic growth as causation between debt and growth was also found to be weak and insignificant in Nigeria.

In a similar study, Okolie (2014) examined external debt crisis, debt relief and economic growth in Nigeria using descriptive survey. He argues that the huge external debt owed by Nigeria was responsible for the slow economic growth and development in the country. He added that lack of fiscal discipline, which was due to lack of integrity, accountability, over dependence on oil revenue and poor project implementation were the factors responsible for the Nigerian debt crisis in the past. He therefore concludes that the debt relief has not translated into much desired economic growth and development and therefore recommends that strict policy guidelines should be adhere to in order to prevent future debt overhang.

In a similar study, Fosu (1996) tested the relationship between economic growth and external debt in sub Saharan African countries over the period of 1970- 1986 using O.L.S method. The study examined the direct and indirect effect of debt hypothesis. Using a debt- burden measure, the study reveals that direct effect of debt hypothesis shows that GDP is negatively influenced via a diminishing marginal productivity of capital. The study also found out that on the average a high debt country faces about one percent reductions in GDP growth annually.

Warner (1992) tried to measure the size of debt crisis effect on agricultural output using Ordinary Least Squares (OLS) estimation technique for 13 less developed countries over the period 1982-1989. The results revealed that the coefficient of external debt has an inverse relationship with agricultural output and is not statistically significant at 5 per cent level. He affirmed that the reasons for the decline of agricultural output in many heavily indebted countries are declining export prices, high interest rates. Rockerbie (1994) criticized Warner (1992) of various shortcomings. Rockerbie (1994) used O.L.S for each of the 13 countries over a sample period of 1965-1990 and the results affirm that the debt crisis of 1982 had significant effects in terms of dramatic slowdown of domestic investment mostly on agriculture in less developed countries.

Wadad (2012) conducted an empirical examination on the relationship between economic growth, exports and external debt of Lebanon by using the vector error correction models (VECM) and Granger causality technique for the period 1970- 2010. The results show that both, short run a long run relationships exist among the variables. Moreover, the finding suggests, i) bidirectional Granger causality between GDP and external debt servicing, ii) unidirectional granger causality that runs from external debt to exports, iii) unidirectional causality running from exports to economic growth and iv) unidirectional causality running from exchange rate to economic growth.

Abubakar and John (2015) examined the effect of government external debt on economic growth in Nigeria between 1986 and 2013 — using the ordinary least squares method, the results reveal that the impact of government external debt on economic growth over the period under review is insignificant — with external debt which has been enormous over the years contributing minimally to real gross domestic product. The study therefore recommends that loans should be source for within the economy so that the returns on investment will not be tax away by the external creditors in the form of interest payment upon the principal. This will enable crowd-in-effect which in turn accelerates economic activities in the country.

Ezeabasili et al (2011) examined the relationship between Nigeria external debt and economic growth within the period 1975-2006 using Johansen co-integration, granger causality test and error correction mechanism. The results of the error correction estimate revealed that external debt has negative relationship with economic growth in Nigeria. For example, a one per cent increase in external debt resulted in a decrease of 0.027 per cent in gross domestic product; while a 1 per cent increase in total debt service resulted to 0.034 per cent (decrease) in Gross Domestic product. These relationships were both found to be significant at the 10 per cent level. In addition, the pair wise Granger causality test revealed that unidirectional causality exists between external debt service payment and economic growth at the 10 percent level of significance. Also, external debt was found to granger cause external debt service payment at the 1 percent level of significance. Statistical interdependence was however found between external debt and economic growth. Based on the findings, the study therefore recommends that debt accumulation for projects must be matched with the timing of repayment while the portfolio of debt must be diversified in terms of sources and types to avoid harmful concentration and a re-occurrence.

Obademi (2012) empirically examined the impact of external debt on the economic growth of Nigeria from 1975 — 2005. The study adopted augmented Cobb Douglas model and subsequently a dynamic version of the functional relationship was estimated using Co-integration test to capture the long-run impact of debt variables on economic growth. The variables used include the external debt value, domestic debt value, total debt value and budget deficit figures. The proportional impact variables are ratios of the value impact to the gross domestic product (GDP). The result showed that the joint impact of debt on economic growth is negative and quite significant in the long-run though in the short-run the impact of borrowed funds and coefficient of budget deficit is positive. In the study, the speed at which the short-run equation converges to equilibrium in the long-run as shown by the Err or Correction Mechanism coefficient was found to be slow. The conclusion from the study is that through in the short-run the impact of borrowed fund on the Nigerian economy was positive the impact of 4ebtJp4JEç long-run depressed economic growth as a result of incompetent debt management.

Essien and Onwioduokit (1998) carefully examined the impact of external debt on the economic growth of Nigeria by using the Error Correction Estimation technique. The results revealed that the co-efficient of the parameter estimates of the variables used in the study were found to be inversely related with GDP and were also not significant at the 0.05 per cent except the net export which was found significant even at the 0.1 per cent level, The study therefore concludes that high debt burden has been the root cause of Nigeria sluggish growth.

Ajayi and Oke (2012) investigated the effect of the external debt burden on economic growth and development of Nigeria. They adopted the ordinary least squares (OLS) regression technique on secondary data and on variables like national income, debt service payment, external reserves and interest rate. The findings indicate that external debt burden had an adverse effect on the per capita income of the nation and high level of external debt led to devaluation of the nation’s currency, increase in retrenchment of workers, continuous industrial strike and poor educational system and this led to the economy of Nigeria getting depressed. The study therefore recommends that debt service obligation should not be allowed to exceed foreign exchange earnings and that the loan contracted should be invested in profitable Ventures, which will generate reasonable returns for debt repayment.

Tokumbo, Risikat and Oladele (2010) assert that the necessity for governments to in order to finance budget deficit has led to the accumulation of external debt in Nigeria. Hence, the study examined how the use of budget deficits leads to the nmulatiofl of external debt with the attending effects on the growth of Nigeria
my between 1970 and 2003. The findings confirmed the existence of the debt curve and the nonlinear effects of external debt on growth. The study
cludes that if debt-financed budget deficits are operated in order to stabilize the tiebt ratio at the optimum sustainable level, debt overhang problems would be avoided ond the benefits of external borrowing would be maximized
Safdari and Mehrizi (2011) examined the effect of external debt on the economic growth in Iran (1974-2007), by using co-integration test and the error correction mechanism. The results showed that external debt and imports have an inverse relationship with GDP and they are not statistically significant in explaining the economic growth in Iran.

Hassan and Butt (2008) empirically examined the relationship between external debt and economic growth for both the long-run and short-run for Pakistan economy over a period of 1975-2005, using Autoregressive Distributed Lag Approach (ARDL). The findings revealed that total externa1 debt is not an important determinant of economic growth either in short-run or in the long-run. The reason for this is that the ornracted loans may not have been optimally deployed to enable the returns on mvestment meet its obligation. Hence, the level of productivity in the Pakistan economy in the areas of agriculture and service sectors have remained very slow.

Styliaflou (2014) careflully examined whether external debt really promote economic growth in Greece. The study uses time series data from 1980 to 2010. The data were fitted into the regression equation using econometric test statistic such as Phillips Perron, Augment Dickey-Fuller to confirm their stationary. The co integration test also confirms the existence of long-run relationship among the variables used in the study.

In a similar study, Were (2001) examined the relationship between external debt service payment and economic growth in Kenya. He used data covering the period of 1970 to 1995 with the Error Correction Estimation technique. The results obtained confirmed that external debt service has a negative effect on the growth of Kenya economy. Therefore, the study concludes that debt overhang phenomenon happened to this country.

Mulugeta (2014) examined the Impact of external debt on economic growth in Ethiopia within the period 1983 —2013 by Maximum Likelihood approach and Vector error correction model (VECM). The empirical results indicate the existence of long-run relationship between real GDP and external debt. The results of the study reveal that real GDP is influenced negatively by the previous stock of external debt and debt servicing, this is an indication of the existence of debt overhang problem and crowding put effect in Ethiopian economy. The findings of the study also indicate that exchange rate and inflation rate deter economic growth while, private investment and terms of trade have positive impact on the economy. The study therefore recommends that a country should give due attention to proper management of its external debt.

More-also, Ramakrishna (2012) empirically examined the effect of external debt on the service sector and agricultural growth of the Ethiopia economy using time series data for the period of i98120i2. For this purpose, the study employed ARDL, 0integration technique and the error correction model for examining the long-run as well as the short-run relationship among the variables used in the study. The empirical results revealed that service sector growth and agricultural sector growth have contributed positively to the economic growth of Ethiopia. Contrary to the apprehensions about public external debt, it does not have significant influence on economic growth. In view of these findings, the study recommends that the Ethiopia economy should continue with the existing agricultural and service sector policies and need not excessively worry with its growing foreign debt.

On a similar reasoning, Rodolphe (2006) examined the impact of public debt on productivity in Jamaica using panel data approach. Cross-country analysis provides evidence of a significant and negative relationship between total public debt and productivity growth. Looking at the specific channels through which high debt affects productivity growth in Jamaica, the study found out that high public debt has been associated with low output growth. Furthermore, public investment has been crowded out by debt service payment, thereby adversely affecting productivity growth. The study purports that, as external debt rises above a country’s repayment ability, investment is discouraged by the expectation of higher future taxes. Thus, some of the returns from investing in the domestic economy are in effect ‘taxed’ away by existing foreign creditors.

Azam, Emirullah, Prabhakar and Khan (2013) examined the impact of external debt on economic growth of Indonesia for the period covering 1980 — 2012. The ordinary least squares (OLS) estimation technique was used for parameters estimated. The main finding of the study shows that external debt has a negative impact on economic growth during the period under study. Thus, external debt is nota 1essing but rather a burden to Indonesia economy. The study then recommends for good external debt management strategies and that this will enhance the economy growth of Indonesia.

Faraji and Makame (2013) also econometrically examined the impact of external debt on economic growth in Tanzania forth the period of 1990-2010. The study used time series data with Error Correction estimation technique and the results obtained revealed the existence of a direct relationship between external debt and GDP and also external debt service and GDP. The results also indicate that they are statistically significant at the 0.05 level. The Johansen co-integration test confirms the existence of long-run relationship among the variables used in the study.

In a study, Hameed, Ashraf and Chaudhary (2008), carefully examined the relationship between external debt and economic growth in Pakistan by using time series data of gross domestic product, debt service, capital stock and labour force from 1970 to 2003, the study examines the dynamic effects that these variables have on economic performance for the period under study. Co-integration being one of the test instruments was employed to identify, the long-run relationship among the variables used in the study. The long-run relationship shows that debt service affects good domestic product negatively; most likely through its adverse impacts on capital and labour productivity. Granger causality was also estimated through a vector error correction mechanism, and the result indicates that causality runs from debt service to gross domestic product.

Georgiev (2012) examined the implications of public debt on economic growth and development in Italy and Portugal from 1980-2012.The analysis is based on descriptive statistics and panel data. The main findings of the study are that public debt accumulation has a significant and negative effect on economic growth. It was also found that economic growth slows down, budget deficit occurred as a result of low public revenue. This leads to a new debt issuance. As debt piles, the cost of debt and its servicing increase substantially, leading to a decrease in investment levels thus influencing negatively long-term growth. The result is that debt crowds out investments through higher interest rates, increased uncertainty and higher debt servicing costs. As a result, investments decrease, negatively influencing GDP as well.

Mencinger, Aristovnik and Verbie (2014) examined and evaluate the direct effect of higher indebtedness on the economic growth for countries in the European
Union (EU). The study uses panel data set of 25 sovereign member states of the EU covering the period of 1980—2010. The results indicate a statistically significant nonlinear impact of public debt ratios on annual GDP per capita growth rates. In addition, the calculated debt-to-GDP tuning point, where the positive effect of accumulated Public debt inverts into a negative effect, is roughly between 80% and 94% for the ‘old’ member states. Yet for the ‘new’ member states the debt-to-GDP tuning point is lower, namely between 53% and 54%. Therefore, we may conclude that the threshold value for the ‘new’ member states is lower than that of the ‘old’ member states.

Reinhart and Rogoff (2010) examined the impact of government external debt on the long-term real GDP growth rate of 20 advanced and 24 emerging countries over a period of nearly 200 years (1790—2009) using a simple correlation statistic. The results show that below a threshold 90% of GDP, external debt has a positive but weak impact on the long-term GDP growth rate, whereas the effect of external debt on GDP above 90% is negative but statistically significant.

Kumar and Woo (2010), examined the effect of external debt, on the growth of 38 developed countries and 24 less developed countries, by using panel data technique, the results imply a negative impact of rising public debt on GDP growth of the less developed countries. A 10% increase in initial debt-to-GDP ratios reduces growth by about 0.2 per cent per annual, with advanced economies less strongly affected.

In a similar study, Murat and Dilek (2015) examined the effect of external debt on economic growth in Turkey, utilizing annual data for the period of 1971—2011. The study used Auto Regressive Distributed Lag bounds test approach to co-integration developed by Pesaran et al. (2001). The findings obtained from long-run analysis reveal that the external debt has a negative and statistically insignificant effect on economic growth. While the results of error correction mechanism show that the external debt, in the short run, has a negative but statistically significant effect on economic growth. The significance of these empirical results is that external debt failed to impact growth on the economy on the long-run. It is only in the short-run as indicated in the results that external debt impacted growth on the economy.

Cristina, Checherita and Philipp (2010) critically examined the impact of government debt on per-capita GDP growth in welve-euro area countries over a period of about 40 years starting from 1970—2011 using two-stage least squares (2- SLS) estimation technique. The results found out a non-linear impact of debt on oMh with a turning point beyond which the government debt-to-GDP ratio has a deleterious impact on long-term growth—at about 90-100% of GDP. Confidence intervals for the debt turning point indicates that the negative growth effect of high debt may start already from levels of around 70-80% of GDP, which calls for even more prudent indebtedness policies. At the same time, there is evidence that the annual change of the public ratio and the budget deficit-to-GDP ratio are negatively and linearly associated with per-capita GDP growth. The study therefore recommends for debt reduction and good debt management policy for the purpose of longer-term economic growth.

Kasidi and Said (2013) examined the impact of external debt on economic growth of Tanzania for the period 19902010. The study used Error Correction estimation technique on time series data for the period. The results revealed that the external debt and external debt service had significant impact on GDP growth. The co-integration results also show that there exists long-run relationship among the variables used in the study.

Garba (2014) empirically examined the relationship between government external borrowings and economic growth in Nigeria. Time series data from 1981- 2012 were fitted into the regression equation using the ordinary least squares (OLS) estimation technique. The results of the OLS showed that external debt has a significant and positive relationship with the gross domestic product. This result is consistent with a number of earlier studies reviewed in the literature that found external debt and gross domestic product to have a positive relationship.

Ferreira (2014) examined the relationship between the foreign debt and real GDP growth in the universe of the 28 European Union countries for the period 200 1-2012. The study employed the use of panel granger causality estimations technique and the results show statistically significant causality between foreign debt and economic growth. Moreover, the study shows a clear evidence of economic growth which contributes to debt reduction.

Irma (2015) empirically assess, using panel data estimation technique the effects of public indebtedness on economic growth for a group of 11 central and eastern European countries for the period of 1994-2013. The results confirm a maximum debt threshold for all countries of about45-55% of GDP. The threshold for Central and Eastern European countries was found to be low as indicated by the result.

Khorshed (2000) empirically examined the ‘debt problem’ in Australia whether external debt is a symptom or a cause of economic slowdown in the country for the period of 1976-1997 using the concept of causality as proposed by Granger (1969) for estimation technique. The statistical tests of causal relationships between the GDP growth rate and the external debt accumulation revealed unilateral causation flowing from gross external debt (GED), net external debt (NED) and non-official external debt (NOD) to GDP. The long-term impact of these categories of debt on GD? growth is small but positive. Secondly, gross official external debt (GOD) rate and GDP growth rate are statistically independent (neutral) over the sample period.

On a similar cause, Lainã (2011) carefully examined the dynamic interactions between total debt and GDP for the period of 1959 to 2010. The data is quarterly and is based on the United States covering the period under study. The structural Vector Auto Regressive (VAR) model was- estimated. Then, the dynamic interactions were studied using granger causality tests, impulse response functions and forecast error variance decompositions. The main finding of this study is that real total debt growth’s affects real GDP growth, but there is no feedback from real GDP growth to real total debt growth. The response of real GDP growth to. a shock in real total debt growth seems to be transitory, but the level effect might be persistent. In both cases the effect is in the same direction. Thus, a positive shock in the growth rate of real total debt has a transitory positive effect on real GDP.

Similarly, Ayadi (2008) investigated the impact of indebtedness and debt service Obligations on economic growth of Nigerian and South African economies. On this Study he attempted to explore a linear as well as non-linear effect of debt on growth and investment using both ordinary least squares (OLS) and generalized least squares (GLS) in his analysis. He finds that external debt and servicing requirements have negetive effects on both countries economic growth. Moreover, from the result, the study concludes that, South Africa performs better than Nigeria in the application of external credits to promote economic growth. In addition, Nigeria external debt affects economic growth positively up to a certain point after which its contribution became negative.

Awan, Asghar and Rehman (2010) asserted that investment and growth are depressed in case of debt accumulation. They concluded that external debt slows
down economic growth more as compared to domestic debt. They also asserted that the reason behind this could be that debt service is paid in foreign currency and the value of debtor currency is weak as compared to the creditor countries’ currency. They therefore concluded that external debt slows down the economy much more than domestic debt. This indicates that there is need for effective external debt management policies and that debt should be utilized in a manner that it would add value to the economy.

Adepoju, Salau and Obayelu (2007) studied the effects of external debt management on sustainable economic growth and development in Nigeria. Their study concluded that though debt is an important resource needed to support sustainable economic growth; a huge external debt without servicing as it is the case for Nigeria before year 2000 constituted a major impediment to the revitalization of her shattered economy as well as the alleviation of debilitating poverty. Their study concentrated only on the management aspect of the external debt.

Izedonmi and Ilaboya (2012), investigated the debt-growth dynamics in Nigeria using time series data from 1980-2010. Based on co-integration test and error correction estimation technique, the relationship between economic growth and a set of economic fundamentals were estimated. The results of the study were consistent with existing empirical literature on the debt-growth relationship. Specifically, there was evidence of a significant negative relationship between public debt burden and economic growth. Secondly, the ratio of debt service to export was found to have negative and significant effect on economic growth. They recommended that embargo should be placed on new loan acquisition by government and parastatals unless where it is extremely important. Concerted effort should be made towards timely loan repayment and servicing to melt down the negative effect of public debt on economic growth.

Qureshi and Ali (2011) investigated the relationship between public debt and economic growth in Pakistan over the period of 1981-2008. The study used ordinary least squares estimation technique and the results found out that a robust negative relationship exists between public debt and economic growth in Pakistan. In the same vein, Checherita and Rother (2012) using a sample of 112-euro area countries over 1970 – 2008, found a non-linear impact of debt on per capita real GDP growth with a turning point at 90-100% of GDP, beyond which the relationship has a deleterious impart on long-run growth.
In another ta (2002) investigated the long run and short run relationship between External debt and economic growth for Turkey during the period l956-l996 using the Error Correction estimation technique. From the result of the co-integration, that there exists a long-run equilibrium relationship among the variables used the Study. The Granger causality test carried out also found a unidirectional causality from debt to economic growth lending support to the fact that relationship exist between external debt and economic growth.

Aishara, Khateeb and Maitah (1991) examined the size and composition of Jordan external Public debt and its effect on some macroeconomic variables such as private consumption, Public consumption, gross investment, gross tax revenues, direct tax revenues, indirect tax revenues, imports, Gross National Product (GNP), and disposable income. The Study employed the used of Auto Regressive Distributed Lag approach (AGDL) The result show that external loans positively affect consumption, investment, import and GNP. Also, Bader and Magableh (2009) noted that the high public debt in Jordan along with its servicing burden, is clearly hindering the government’s effort to achieve higher and sustained economic gross rates. They investigated the determinant of public debt accommodation of public debt in order to determine the key players in the count. In the study, It was found that real exchange rate, the financial position affect the outstanding of the government and the size of foreign aids significantly effective a balance of external debt, but real exchange rate is the most among all exchange rate is expletory variables. They noted that significant effect of exchange rate is expected, especially after the depreciation of the exchange rate due to Jordan economic crisis of 1988. The study also shows that the increase in saving investment gap necessitated why government resorts to borrow to finance it.

The work of Anyanwu (1995) reveals that external debt of Sub Saharan African nas led to a great deterioration in per capit4 income, consumption, and real gross domestic product (GDP) growth, inflation etc. In the study; it was exerted that even though many factors must have contributed to the deterioration, the debt of the .region is an important factor. Based on the strength of these if findings, the author that debt servicing has absorbed resources which could otherwise have been deployed to other investment opportunities. The debt overhang has significantly reduce the amount of foreign exchange needed to purchase import because the return on investment were taxed away by foreign creditors and the pace of economic growth; lowdown which lead to severe import strangulation.

Batool and Zulfiqar (2012) appraised the determinants of external debt in Pakistan. They noted that external debt is considered to be one of the symbols of an ailing economy. The reason why financially weak countries have to tackle external is that it retards growth. Economic freedom of a country is eclipsed by the clutches of external debt. The study employed OLS regression technique on time series data for the period 1973-2010.The main determinants of the external debt considered are consumption, private investment, public investment, remittances and lending rate. The findings indicated that consumption and private investment have positive and significant effects on external debt. Whereas Public investment and remittances show negative but significant relationship with external debt, Lending rate as positive but insignificant effects on external debt. They concluded that external debt is harmful for an economy so it should be minimized or avoided.
In addition, Afkentiou and Serletic (2006), examined the level of indebtedness and per capita income growth in moderately indebted countries. Having used Granger (1987) causality test, they discovered no causality among the variables used in a sample of fifty-five developing countries. In a similar study, Afxentiou (2007) considered GNP growth and foreign indebtedness in middle income developing countries over the period 1971-2002 and found out evidence of debt overhang problem.

lyoha (1999) adopted a simulation approach to investigate the impact of external debt on economic growth in sub-Saharan African countries for the period 1970 to 1994. An important finding in this study was the significance of debt overhang variables in the investment equation, suggesting that mounting external debt depresses investment through both a “disincentive” effect and a “crowding out” effect. Policy simulation was undertaken ‘to investigate the impact of alternative debt stock reduction scenarios (debt reduction packages of 5%, 10%, 20% and 50%) on investment and economic growth. It was found that debt stock reduction would have significantly increased investment and growth performance.

Bhattacharaya and Nguyen (2003) also empirically examined the channels through which external debt affects growth in low-income countries using the ordinary least squares estimator technique. The results revealed that the substantial reduction in the stock of external debt projected for high indebted poor countries (HIPC’S) would directly increase per capita income growth by about 1 percent per annum. Reduction in external debt services could also enable growth through public investment If half of all debt-service relief is channeled to investment purpose without increasing the budget deficit, then growth could accelerate in the HIPC by 0.5 percent.

Cohen (1993) examined the dynamic impact of external debt accumulation on private investment and growth in Africa. In this regard, his study considered eighty- one (81) developing countries,, forth period 1965-1999, rejecting the debt. Overhang hypothesis and supporting the crowding out effect. The result showed no significant correlation between the debt/export ratio and investment variables, while the debt service is significant and positively correlated with investment. The point estimate of the crowding out effect is 0.03 percent, which implies that for every 3 percent gross domestic product (GDP) transferred abroad in debt service payment, investment decline by 2 percent.

Bauerfreund (1989) used a computable general equilibrium model to measure the cost of external debt to the Turkish economy. In the study, he explained the issue of the debt overhang, using a multi sector, non-linear general equilibrium model. The approach taken to measure the debt overhang is to compare the growth rate of the Turkish economy following hypothetical debt forgiveness. In order for governments to pay debt obligations, they need to levy a tax on the private economy. The tax increase causes a decrease in the net returns of investment, resulting in a reduction of investment in the debtor countries, and a negative effect on future production andi t is believed that indebted countries are able to achieve this by, increasing in practice the experience shows that maintaining increase in exports is difficult. On the other hand, the ratio of imports/export of developing countries grows more rapidly than that of the developed countries.

Savvides (2002) while trying to measure the impact of debt overhang on the economic performance, used two stage least squares (2-SLS) method for section time series data from 43 Less Developing Countries (LDCs) encountering debt problem. The result indicated that debt overhang and decreasing capital inflows have significant negative effect on investment. In line with (2002), Deshpande (2007) attempted to explain the debt overhang hyvothesi by an empirical examination of the investment experience of 13 severely d countries. The author argues that the adjustment measures, which were by severely indebted countries, have an impact on the indebted countries, the investment crisis has typically implied a growth crisis for •the highly indebted countries.

Sheikil et al. (2011) as a result of the low tax base, Pakistan has to rely on both and internal capital flows. The foreign capital flows are not easily accessible but domestic capital flows are approachable at all times. Therefore, the author examined the impact of domestic debt on the economic growth in Pakistan using the ordinary least square estimator technique for the period of 1972-2008. The result obtained shown that the stock of domestic debt affects economic growth positively.

Thus, the resources generated through domestic borrowings have been used optimally the expenditure which contributes to economic growth.

Brownson, Vincent, Emmanuel and Etim (2012) examined the impact of external debt on the growth of agricultural sector in the Nigerian economy. They the ordinary least squares (OLS) estimator technique. The results of their study revealved that external debt has a significant negative effect on agricultural productivity in the country in both short and long-run. Their results also indicate that aggregate level, debt adversely affects the growth of agricultural economy and the causality is a un-directional one, that is the growth of agricultural economy is adversely affected by a higher debt burden. They therefore, suggest measures that alleviate the problem (privatization and sustained export promotion programme).

Adetula (2009) carefully explored the effect of external debt service payment practices on agricultural productivity in Nigeria. The ordinary least square estimator technique was used for the regression. Data collected from various secondary sources cover the period 1981 to 2004. The empirical results indicated a significant impact of debt services on agricultural productivity. The study therefore recommends for more foreign loans for agricultural expansion.

Oguridele (2011) examined the impact of external debt on the growth of agricultural output in Nigeria. Time series data from 1970-2007 were collected from various secondary sources and vector error correction method (VECM) was used. The results confirm that mounting external debt depresses agricultural performance through a ‘disincentive’ effect and ‘crowding out’. The study therefore recommends government should ensure that the contracted loans from the foreign creditors should be properly deployed for the purpose for which it was obtained. For example loan for agricultural productivity should be properly spent whereby incentives are given to farmers through agricultural loans grant.
Edo (2012) examined the African debt problem with reference to Nigeria and Morocco. He applied vector autoregressive (VAR) approach. The results indicate that xterna1 debt has affected investment, adversely. Other findings include fiscal expenditure, balance of payments and interest rate account for the major factors for 1ebt accumulation in the studied countries. He therefore, suggests measure that could reduce the above problems (restructuring and development of capital markets and prevatazation).

Mukhopadhyay (1995), examined the relationship between external debt and growth of the manufacturing industries using Autoregressive Distributed Lag approach (ARDL)..His comprehensive study cover the following developing countries; Argentina, Brazil, Columbia, Equador, Mexico, Philippines, Thailand, and Uruguay from which the data were drawn for the period 1971 to 2003. The results show that rapid growth of external debt crowed out investment through their effects on both demand and supply of credit.

Safia and Shabbir (2009) investigated the impact of external debt on economic growth in 24 developing countries from 1976 to 2003 .The study applied random effect and fixed effect and panel data for estimation. The results showed that debt servicing to GDP negatively affect the economic growth and may leave less finds available to finance private investment in these coi1thtries leading to a crowding out effect.

Abu-Baka and Hassan 2008), examined the impact of external debt on the economic growth in Malaysia. The examination was conducted both on aggregate and is aggregate level using ordinary least squares estimation technique. The empirical ii1tS indicated that total external debt positive affect the economic growth at aggregate and disaggregate level. In the short-run, total external debt had positive effects on economic growth. It also revealed that Malaysia had not suffered from debt overhang problem.

On a similar line Cholifihani (2008), examined the short run and long run relationship between external debt and income in Indonesia from 1980 to 2005. He applied two- stage least squares estimator technique and the findings showed that gross domestic product (GDP), capital stock, labour force and human capital inputs have a long run equilibrium relationship. External debt servicing showed a significant aim negative relationship with GDP, which indicated that debt overhang phenomenon, has occurred in Indonesia in the long run. While labour force and human capital were the main supporting variables of GDP in the long run; however capital stock is significant in boosting economic growth.

Sahabat and Butt (2008) investigated the impact of trade liberalization policies and measures on external debt burden in Pakistan. in order to examine the long run relationship, the study utilized the ARDL bounds t sting approach and ECM, to test the short-run dynamics using data from 1972-2007. The empirical results show, a significant long run positive association between export and trade to the external debt.

0seque1tlY in the long run, imports and exchange rates have affected the external debt negatively. Meanwhile, in short run, a significant positive relationship is reported between exports and the external debt. While for the imports, a negative significant relationship exists between import and external debt burden.

Nathakumar, Muhammad and Nur (2010), studied the long-run and short-run relationship between external debt and macroeconomics performance of Malaysia within the period 1988 to 2008 using the vector error correction method (VECM). The results found out a significant long-run and short-run relationship between external debt and macroeconomics variables performance with 13 percent of speed of adjustment to restore equilibrium condition in the long run. In addition, the findings of this study show that, Malaysia’s external debt is ‘sustainable’ with its macroeconomics performance. –
Hofinan and Reisen (1991) compare responses to debt overhang from countries facing liquidity constraints to those with access to new investment Opportunities. They find that direct debt reduction from the creditor would lead to a greater boost to the debtor nation than new investment, but note that countries Constrained by liquidity require new sources of funds to be able to take advantage of Profitable investment opportunities when they arise. They conclude that in such Circumstances reducing the stock of external debt without compensating with new lending will not lead to a tangible improvement to investment.

Ekpo and Egwaikhide (1998) used the two-stage least squares technique to the relevance of debt overhang hypothesis in Nigeria. The study regressed private investment on debt service payment as a percentage of export earnings, public inflation rate, bank credit to the private sector, terms of trade and export results revealed that the coefficient of debt service ratio has a negative which implies an inverse relationship but statistically significant at 5 percent Thus, it is apparent that debt servicing advere1y affected private investment me, period of study. The historical simulation carried out to assess the validity model gave a Theil’s inequality coefficient of less than 0.08 percent for not and output. The result of the policy simulation of the effect of debt reduction packages revealed that the hypothesized 4ebt reduction of (40 percent, 50 and 75 percent) assumed effective in l96 would significantly increase investment and GDP.

Iyoha (1996) carried out an econometric study of debt-overhang, debt reduction, investment and economic growth in Nigeria for the period 1980-1994. He developed a macro-econometric model which permitted the simulation of the effects of external debt on economic growth in Nigeria. The completed simultaneous equation model in study consisted of two stochastic equations for output and investment and five identities for debt accumulation. He used the two- stage least squares (2SLQ) technique and found a significant debt overhang effect as well as a “crowding out” effect of external debt servicing on-investment and, economic growth in Nigeria for period of his study.

Uniamukogbo (1991) gave an empirical analysis of Nigeria’s external debt and interest payment between 1971 and 1988 using the ordinary least squares estimator technique. He expressed interest payment as a function of export of goods and services, per-capita income, change in per capita income, the magnitude of long-term public debt and long-term private external debt. He observed that Nigeria had the ability to pay interest on her debts during the study period (1971-1988). In terms of willingness to pay, it was equally observed that the country was willing to pay interest her indebtedness because of her enormous receipts from export. His estimation further revealed that change in per capita income had no significant impact on interest payment during the period of his study
Obadan (2004) in a study on foreign borrowing and development in Nigeria which Basically an exposition of the theoretical basis of the relationship between foreign debt and growth in Nigeria, used descriptive method of analysis, and observed that foreign debt can increase resources available for investment by supplementing domestic savings and augmenting foreign exchange earnings of the country. According to Obadan (2004), a country’s foreign borrowing requirements depend on its total expenditure in relation to her total domestic production. For foreign borrowing to impact positively on economic growth, it must add to domestic savings aria investment. Furthermore, Obadan asserts that for a country to reduce her foreign loan requirements, it has to increase her domestic savings sufficiently enough to ‘stain her desired target rate of growth.

Similarly, in order to examine the impact of Sudan’s external indebtedness on economic growth, Mohamed (2005) used ordinary least squares estimator with time series data from 1978 – 2002. The findings of the study expose the existence of debt overhang problem in Sudan, i.e. external debts exceed the country’s ability to repay. The study concluded that external debt and inflation prevent the growth of the economy, while the impacts of export earnings exhibit positive relationship. Hence, the results of this study support the need of Sudan to be considered for comprehensive debt relief measures.
Deshpande (1997) examined the debt overhang hypothesis by using Ordinary Least Squares of the investment experience of thirteen severely indebted countries. He opines that in countries with debt overhang, external debt captured many of the effects of other independent variables that explain investment levels. In particular, he demonstrates that the relationship between external debt and investment during the 1980s was consistently negative for the sampled countries.
Elbadawi and Ndung’u (1997) confirmed debt overhang effect on economic growth for 33 developing countries spanning Sub Sahara Africa (SSA), Latin America, Asia and Middle East by using OLS estimator technique. They identified three direct channels in which indebtedness in SSA works against growth, current debt inflows as a ratio of GDP which should stimulate growth, past debt accumulation capturing debt Overhang and debt service ratio. The results found out that debt accumulation deters growth while debt stock spurs growth. The results also showed that debt burden has led to fiscal distress by severely compressed budget.

Bhattarcharya, Clement and Nguyen (2005) examined the impact of debt burden on the economic growth of some Africa countries. On the cause of their empirical examination, they employed the OLS estimator technique with the data covering 55 low-income countries over the period 1970 – 1999. The results found out that large debt burdens have not seriously hampered public investment in low-income countries and that in most cases debt relief has lead greater consumption rather investment that could have contributed to further economic growth.
To the contrary, Arslanalp and Henry (2005) on the other hand, show that the debt restructuring and reduction under the Brady Plan led to rising asset prices, increase investment and faster growth in the 16 developing countries that received Brady deals in the period 1989 – 1995. According the authors, the Brady Plan worked quite well because debt relief was granted to a group of middle-income developing countries where debt overhang genuinely stood in the way of profitable new lending and investment. It is far from certain that the positive results of the Brady Plan can be used to forecast the potential impact of further debt relief on HIPCs (Arslanalp ; Henry 2005, p, 1048). Consequently, Arslanalp and Henry (2006) do not expect that further debt relief will address the fundamental problem of inadequate economic institutions that impedes investment and growth in the world poorest countries. In their findings, the indirect approach of debt relief does little, if any good given the overwhelming evidence that debt relief cannot be expected to have notable positive effect on governance quality and economic growth.
2.5RATIONALE FOR EXTERNAL BORROWING
Todaro and Smith, (2006) abounds with a view for the relevance of external loans for economic growth and development. Immediately after the Second World War, the economies of the Western Europeans countries began to experience a rapid increase in the growth and development as a result of foreign loans obtained. The economies of the developing countries benefited from the foreign capital inflows due to oil price increase which resulted from Arab-Israeli wars of the 1970s.
Early in the 19th century,’ foreign capital inflows in the form of external loans played an important role in the construction of Siberian Eastern railroad in Russian, The loans from British, German and Japanese made the construction of the railroad possible. Therefore, countries borrow for the following reasons:
Countries borrow in order to finance the excess of government expenditure over its revenue and to complements domestic savings in order to make possible our domestic investment for the purposes of economic growth and development.
External borrowing arises to finance savings-investment gap, savings-foreign trade gap and savings-technology gap.
More-also, countries borrow for the purposes of financing balance of payment deficits.
External loans play a vital role in supplementing domestic resources in order to meet the countries developmental objectives (Todaro, 2006). External loans also provide a country with foreign exchange earnings which is required for the importation of machinery and technical expertise for economic growth.
Friedman, (1984) asserts that external loans play a crucial role in the creation of more employments, investment and high living standard. Anyannwu (1997), hold the same view that external borrowing enables the developing countries to increase their rate of real investment in order to stimulate growth.
Ihimodu (2001) opines that the demand for foreign loans by the developing countries is to relieve these countries from the burden of scarce domestic savings and foreign exchange earnings. This implies that the resources can be used to buy time until domestic savings and foreign exchange increases.
The dual gap analysis explains that development is a function of investment and that such investment requires domestic savings which is not sufficient to ensure the require investment that would enable development to take place. Therefore, there must be the need to obtain from abroad the amount that can be invested to fill the gap. In this regard, Fajegan (1978) asserts that external capital has a strong influence on economic growth. In the same line of reasoning, Usman (2001) stated that foreign borrowing has the advantage of protecting the foreign exchange position of a country.
The low level of domestic savings and the high propensity to consume also account for the rationale for foreign loans in Nigeria. Chenery et al (1996) assert that many developing countries depend largely on external finance because it has the advantage of reducing investment ‘crowding out’ effect. This can happen as a result of scarce domestic resources which can be supplemented by foreign loans.
2.6CAUSES OF EXTERNAL BORROWING
The origin of the external debt dates back to 1958 when the sum of US$28 million was contracted for railway construction (CBN 1994). Between 1958 and 1977, Nigeria did not resort to much borrowing from external sources (Ndekwu 1983). The period, particularly from the middle of the 1970s, coincided with the oil boom which fetched the country sufficient foreign exchange earnings to meet its obligations. However, debts contracted during the period were the concessional types from bilateral and multilateral sources with longer repayment periods and lower interest rates.
However, from 1978, owing to the oil glut which exerted considerable pressure on government finances, it became expedient to borrow for balance of payment support and project financing. As a matter of fact, a major justification for external borrowing arises from the need to finance the excess of government expenditure over its revenue and that external borrowing complements domestic savings in order to make possible higher rate of capital formation or domestic investment. In this respect, viable investments which could not otherwise be financed domestically would be made possible (Obadan & Iyoha, 1996).
Hunt (2007) exerts that many factors are responsible for the Nigeria external indebtedness. One of them is the over ambition of government to rapidly boost economic growth and development in spite of the insufficient domestic capital formation. The government obtained much foreign loans particularly in the 1980s because the military government at that time found it easier to borrow than to raise taxes which could have made them unpopular. The argument here is that the acquired debt was not properly channelled to increase productive capacity of the economy which in turn would generate returns for the debt repayment and promote economic growth and development. A substantial part of loans was diverted to other uses instead of being invested in productive projects for which the loans was obtained for.
Nigeria has a greater propensity to consume than to save. During the oil boom period, the Nigerians developed high expensive tastes and this lead to waste of resources. Even when the oil glut occurred, the public and the private sectors did not adjust their expenditure to suit the dwindling economy, hence the high accumulation of short-term trade debts as imports were kept high to meet their taste (Sanusi, 1990).
The global economic recession of the early 1980s lead to the problem of reduction in demand for our exports products. In addition, the deteriorating terms of trade caused by the economic recession resulted to our balance of payment problems. However, based on the assumption and the speculations that the global economic recession is for a short time and that prices of non-oil commodities would recover soon, the country inevitably resorts to external borrowing to finance the agricultural and the service sectors and balance of payment deficits.
The external debt crisis in Nigeria has been largely caused by excessive rates of government borrowing requirements (RGBR) arising from persistent and growing budget, deficits. It is true that external debt component is additionally influenced by international financial market situations, yet our argument is that an effective control of the external borrowing and government expenditure will have a strong effect in slowing down external debt growth.
2.7DEBT MANAGEMENT STRATEGIES
Nigeria’s external debt management strategies varied from time to time since the early 1980s, when the debt crisis became manifest. To this end, a comprehensive policy strategy was evolved in February, 1988. Firstly, this was targeted to increase foreign exchange earnings in order to reduce the need for external borrowing. Secondly, the policy strategy set out the criteria for borrowing from external sources and determined the type of projects for which external loans may be obtained. Thirdly, it was to outline the mechanism for servicing the external debt. Fourthly, the strategy also outline the roles and responsibilities of the various organs of Federal and State Governments in the management of external debts (CBN 2006).
Consequently, various guidelines were issued as regards government borrowing. Some of the measures include statutory or legal limits on the volume of debt to be contracted; ceilings on volume or magnitude of debt service; issuance of debt-servicing directive by the government and debt conversions programmes.
As part of the external debt management, the strategies adopted by the Nigerian Government to manage the country’s debt were carefully designed to ameliorate the debt effect and to stimulate economic growth. In this regard, we shall discuss them briefly.
Embargo on New Loans
Obadan (2004), stated that embargo on new loans should be strategy to control or manage the external debt of Nigeria. Occasionally, the Federal government fixes the maximum level of debt commitment both the Federal and the State Governments. For instance, following the end of the Civil war in 1970, the ‘External Loans Decree’ was promulgated. This Decree authorized the raising and use of external loans for amounts not exceeding 1.0 billion naira for the purpose of economic rehabilitation, reconstruction and development, and also on-lending to State Government. The loans limit was increased to 5.0 billion naira under the external loans Decree No. 30 of 1978. By 1992; it was 200 million for any State Government. This stipulation has remained unchanged even though no government complies; whereas if the provision of the decree had been strictly adhere to, Nigeria probably would not have run into debt crisis it now experiences. In 2006, states governments were required not more than 10 per cent of their total revenue for debt service payments. Based on this, the default government could be bailed out, as the amount of default would be deducted at source from its budgeting allocation (Federal Ministry of Finance, 2006).
Limit on Debt Service Payments
This requires the setting aside of a proportion of export earnings to meet debt service obligations in order to allow for internal development. In this regard, State Governments were required in 1990 to spend not more 10 per cent of their total revenue on debt service payments. The Federal Government allocated 30 per cent of export earnings for external debt servicing.
Debt Restructuring
The restructuring of debt involves the conversion of an existing debt into another category of debt, through refinancing, rescheduling, debt buy-stock and issuance of collaterized bond and the provision of new money. Each of these options has been used to alter the composition of the external debt stock. Even though, they have had significant effects, the outstanding debt continues to grow with the additional debt acquisition (Obadan & Iyoha, 2009).
Debt Conversion
Obadan (2004) states that debt conversion complements other strategies for external debt management. The exercise involves the sale of external debt instrument for a domestic debt or equity participation in domestic enterprises. From 1998 to 2003, a total of US$800.1 million has been redeemed through this process. Therefore, debt conversion programme has the following advantages:
to stimulate employment and investments in e economy.
to encourage capital inflow and attract foreign investors as a way to improving economic development.
to foster the development of export-oriented industries, thereby diversifying the export base of the Nigerian economy.
2.8GAPS IN THE LITERATURE
Most of the literature reviewed focused on external debt and economic growth. Brownson, Vincent and Etin (2014) studied the impact of external debt on the growth of the agricultural sector of the Nigeria economy using ordinary least squares (OLS) technique. The present author proceeds to bridge the gap in the literature by studying the impact of external debt on agriculture on the level of agricultural production in Nigeria as well as the service sectors using the Error Correction Mechanism (ECM). The outcome of this study should constitute a vital contribution to literature on the subject.
CHAPTER THREE
RESEARCH METHODS
3.1THEORETICAL FRAMEWORK
Several theories have been adduced explained the transfer of capital from the surplus to the deficit countries and its consequences. In this study, we intend to employ the neo-classical model of economic growth and the two-gap theory. In line with the neo-classical theory of economic growth there is the tendency for the rate of profit to fall in capital surplus countries due to increasing competition. Looking at it from this perspective, international capital movement is an aspect of international trade where comparative advantage determines the direction of export.
This further incorporated capital and labour whereby the surplus/deficit is based on the balance of payments. A surplus balance would encourage the export of capital to meet up the deficits balances of the countries that have experienced a shortfall in the exportation of the goods and services in order to meet their domestic requirements. In this regard, we 100k at the economy in which external borrowing is used to substitute for capital and labour as factor costs in the production of output in the agricultural and service sectors. It is believed therefore, that foreign loan is financed by output from the service sector and agricultural sector.
In this study, we employ the development theory below to account for the theoretical justification for borrowing.
(i) The Two-Gap Theory
There exists a linkage between external borrowing and domestic economic management. Economic agents borrow either on behalf of the government or otherwise to bridge the savings-investment gap, savings-foreign exchange gap and savings-technology gap. The external borrowing also becomes necessary as a way to bridge investment-saving gap which is said to exist if the domestic saving is less than the level required for achieving a target rate of output growth. The consequences of these gaps on the Nigerian economy has become a matter of interest; hence the need to bridge the gap was quite evident in the past and now. For this reason, various foreign donors directed the governments to prepare development plans needed to achieve output stabilization and diversified economic growth in the long-run particularly in the agricultural and service sectors.
Herrick and Kindleberger (1977) developed the ‘two-gap’ approach for economic growth and development. The belief is that ‘investment-saving gap’ are two different constraints to growth in developing countries. In order to determine the magnitude of the gaps, there is the need to state the warranted growth rate. However, this can occur on account of the fact that the capital-output ratio is fixed. Investment-saving gap occurs when the domestic savings-ratio falls shot relative to investment that is needed to achieve the warranted growth rate. The economy can reach the warranted growth rate by filling the investment-saving gap through external loans.
The national income accounting identities can be of great relevance in explaining the two-gap theory. Given the assumption and the specification of the model, income can be obtained as the sum of consumption spending, expenditure on investment and the difference between exports and imports. That is
Y = C + I + G + (X – M) …………………………………….. (3.1)
Where
Y = output
C = consumption
G = government expenditure
(X – M) = difference between exports-and imports
By opening the bracket, equation (3.1) becomes
Y = C + I + X – M ……………………………………….. (3.2)
Hence, we can therefore obtain:
Y – C + M = I + X ……………………………………….. (3.3)
From equation (3.3) we define savings as a portion of income not consumed i.e.
S = Y – C ………………………………………………………………. (3.4)
Using this saving function, equation (3.3) highlights the two-gap, that is
S + M = I + X ………………………………………….. (3.5)
From equation (3.5), we obtained
M – X = I – S ………………………………………….. (3.6)
Where
Y = Income
C = Consumption
X = Export
M = Import
Here we have foreign trade gap (M – X) which implies exports fall short relative to imports and investment-saving gap (I – S). It is no certain that both the foreign-exchange gap and the investment-saving gap must be equal as found in equation (3.6), this is because the trade gap could still be found even when there is no investment-saving gap. The prevalence of this, causes barrier for the less developed nations to be able, to transform its domestic savings into foreign exchange.

Hunt (2007) states that a rise in investment d saving in any economy could lead to increase in output (agricultural and service output) via economic growth. Sachs (20Q2) states that growth will not occur unless there exist a rise in capital stock to a given level. Growth is determined by the saving decision because all savings are invested and become part of capital stock. As capital rises, investment and output rise therefore, saving level continue to increase. At a given level, a rise in capital and saving will be enough to bring about long-run self-sustained economic growth which is referred to as golden age growth path. Golden age with path refers to an economy where labour is growing exogenously at a constant proportionate rate and capital stock is also growing exponentially at the same cons ant rate. Then output will also grow at the same proportionate rate. Therefore, output per head will be constant and so will be capita per head. The higher a golden age growth path, the higher the income per capita, the higher the capital intensity (or capital labour ratio). Furthermore, the higher a golden age growth path is, the higher the real wage but the lower the real rental on capital. The necessity for government to borrow in order to bridge the investment-saving gap (I-S), foreign trade gap (M-E) and ensuring self-sustained economic growth instead of utilizing only domestic resources is accounted for by the dual gap theory. According to the theory, growth requires investment goods, which may either be provided domestically or purchased from abroad. The domestic provision requires saving; the provision requires foreign exchange. When it is believed that some investment goods for growth can only be provided from abroad, there will be a minimum foreign exchange required to sustain the growth process. The dual-gap analysis suggests that the excess of investment requirement over domestic savings (investment-savings gap) equal a surplus of imports over exports (import-export, or foreign exchange gap). Therefore, investment is explained by the amount of saving in an economy. Putting in an algebraic linear form,
INV = f(S) ………………………………………………… (3.7)
Where
INV represents investment
S represents savings
Note that Y = C + I ……………………………………………………….. (3.8)
Y – C = I …………………………………………. (3.9)
Y = C + S ………………………………………… (3.10)
Y – C = S ………………………………………… (3.11)
Since S = Y – C and I = Y – C
Therefore, I = S
and because of inadequate saving in our domestic economy which is not enough for the investment required to bring about economic growth through agricultural productivity and service sector in the economy, it becomes relevant to ask for foreign loans. The need for foreign loans depends on the direct relationship between level of domestic savings and investment required for economic growth which remains the basis on when and how much to borrow. In line of this, the debtor country increases its, capacity utilization which in turn leads to increase in output.
Hence foreign loans become indispensable as it helps developing countries that are characterized with low saving to finance their investment-saving gap and balance of payment deficits. As a matter of fact, the high level of debt is associated with a significant capital flight and mismanagement of resources needed for debt service payment (Smith, 1997). The factors responsible for the debt build-up are found to be associated with short debt maturities and grace periods, projects tied to loans without considering its economic viability, the substitution of short-term loans for long-run period and high interest rate on the loans.
3.2MODEL SPECIFICATION
The study adapted an economic model previously used by Ijeoma (2013) to examine the impact of external: debt on the Nigerian economy. The work which has earlier been reviewed in the empirical studies made used of External debt (EXD) and Exchange rate (EXR) on the national output (Y). Hence:
Y = f (EXD, EXR) ……………………………………. (3.12)
Where:
Y = output
EXD = external debt
EXR = exchange rate.
Now expanding model (3.12) above and incorporating variable(s) of interest, the adapted model becomes:
Model 1
AGR = f (EXD, EXR, GEA, EDS) ……………………… (3.13)
Model 2
SVR = f (EXD, EXR, GES, EDS) ………………………. (3.14)
Where:
AGR = agricultural output
EXD = external debt
EXR = exchange rate
SVR = service sector
GEA = government expenditure on agriculture
GES = government expenditure on service sector
EDS = external debt servicing
Equation (3.13) posits that agricultural output in Nigeria is explained by external debt (EXD), exchange rate (EXR), government expenditure on agriculture (GEA) and external debt servicing (EDS). From this model, estimable equation was formed hence we re-write equation (3.13) above and incorporate the error term (Ut). The equation becomes:
AGRt = ?0 + ?1 EXDt + ?2EXRt + ?3GEAt + ?4EDSt + Ut ……………. (3.15)
A priori expectation: ?1 – ?3 > 0, ?4 < 0
Where:
? = parameter estimate
Ut = error term
The Error Correction Mechanism (ECM) For Agricultural Sector Model
Given that the residual from the co-integrating regression is stationary, and that the variables are co-integrated, the next stage is to estimate the error correction representation. The ECM was estimated to obtain the short-run behaviour of the variables and the speed of adjustment of the model to its long-run value. Therefore, the estimated dynamic error correction model is shown below:
Model 1
?AGRt = ?0 + ?1?EXDt + ?2?EXRt + ?3?GEAt + ?4?EDSt + ØZt-1 + Ut …. (3.16)
We also hypothesize that service sector is a function of the causal variables used in equation (3.14). Hence, we have
SRVt = ?0 + ?1EXDt + ?2EXRt + ?3GESt + ?4EDSt + Ut ……………………… (3.17)
A priori expectation: ?1 – ?3 > 0, ?4 < 0.

The Error Correction Mechanism (ECM) for Service Sector Model:
Model 2
?SRVt = ?0 + ?1?EXDt + ?2?EXRt + ?3?GESt + ?4?EDSt + Ø?t-1 + Ut ………. (3.18)
3.3SOURCES OF DATA
The study uses annual time series data covering the period of forty-six (46) years that is from 1970 to 2015. The data were obtained mainly from various secondary sources such as National Bureau of Statistics, Annual Report and Statement of Accounts and other documents of the Central Bank of Nigeria.
3.4 METHOD OF DATA ANALYSIS
One of the preliminary investigations that was used in this study includes the analysis of the descriptive statistics (mean, median, standard deviation skewness and kurtosis) of the variables used in our study for the sample period of forty-six (46) years. It has been noted that time series data which are highly trended (whereby, their ‘means change over time or are unstable or possess unit roots) could result to either overestimation or underestimation of the standard errors or t-statistics in regression analysis, thereby making the Ordinary Least Squares (OLS) estimates spurious or unreliable (Granger and Newbold, 1974; Dickey and Fuller, 1981; Dickey, Bell and Miller, 1986;). In order to establish the nature of the variables in this study whether the variables are stationary or otherwise, the Augmented Dickey-Fuller (1988); unit root test was employed. Co-integration properties of the variables in the models were also tested by applying Johansen co-integration test. The theory of co-integration arises out of the need to integrate short-run dynamics with long-run equilibrium. These authors have proved that co-integration is a sufficient condition for an ECM formulation. For instance, by combining changes (differenced variables) and levels (the estimated error term from the co-integration regression), the ECM model ensures that all its components are stationary. It thus preserves the long-run relationship (given by the ECM term) while specifying the system in a short-run dynamic way (Dickinson et al 1992). We have considered the stationarity necessary in this study because it enhances the test of presence of unit root which also helps to determine the order of integration as well as the estimate of error correction model (ECM). As part of the econometric techniques for co-integration analysis, the short-run dynamics of the models are corrected by using ECM, following Engel and Granger (1987). The ECM coefficient describes the short-run adjustment dynamics back to the long-run equilibrium values.
Å stationary time series is defined to be integrated at order zero, 1(0); and a time series Yt is believed to be integrated of order one or I(1) if ?Yt is a stationary time series. In general, Yt is integrated of order k implies that ?kYt will be I(0). That is kth order differencing will produce a stationary series. Granger (1986) and Engle and Granger (1987) have Shown that if two series Yt and Xt are I(1), then Yt and Xt are said to be co-integrated. Thus, in the regression equation:
Yt = ?Xt + Ut
and the residuals,
Ut =Yt – ?Xt.

This measure the extent in which the system Yt and Xt is out of the equilibrium – Ut is the disequilibrium error term, and must be stationary. Thus, there is a long-run relationship between the two series. However, if Yt and Xt are not co-integrated, so that Ut is also I(1), the equilibrium concept has no meaningful relevance and the two series can wander widely away from each another, suggesting that the series are not elated over time.
Another test used to assess the integrated property of variables is the use of Durbin Watson (DW) test statistics. We use Durbin-Waston statistic to test for first – order serial correlation.
CHAPTER FOUR
PRESENTATION OF DATA AND DISCUSSION OF RESULTS.4.1DATA PRESENTATION
The data on agricultural output, external debt, exchange rate, government expenditure on agriculture, government expenditure on the service sector, external debt servicing, and service sector output in Nigeria from the period of 1970 to 2015 used in this study are presented in Table 4.1 (Appendix 4).
Table 4.2
Indicators of Trend Analysis 1970 – 2015
AGR EXD EXR GEA EDS GES SVR
1970-1974            
Sum=16342.2 1218.4 3.3042 39.4 412.5 131.64 6896.9
Avg=3268.44 243.68 0.66084 7.838 82.5 26.338 1379.38
             
1975-1979            
Sum=36643.2 3953.2 3.1169 81.41 503.4 351.8 23123.8
Avg=7328.64 790.64 0.62338 16.282 100.68 70.36 4624.76
             
1980-1984            
Sum=82133.9 38403.8 3.4085 93.4 5374.9 793.7 91509.4
Avg=16426.78 7680.76 0.6819 18.68 1074.98 158.74 18301.88
             
1985-1989            
Sum=221354.3 533892.1 21.5108 322 32513.2 3566.39 78355.5
Avg=44270.86 106778.42 4.30216 64.4 6502.64 713.278 15671.1
             
1990-1994            
Sum=908111.6 2453289.7 132.933 3909.77 217911.4 13747.17 262207.9
Avg=181622.32 490657.94 26.5965 781.954 43582.28 2749.434 52441.58
             
1995-1999            
Sum=4600090.4 5140508.5 180.073 67869.71 480689.6 48152.04 1241182.3
Avg=920018.08 1028101.78 36.0145 13571.942 96137.92 9630.58 248236.46
2000-2004            
Sum=13673206.6 19575158.6 616.513 42187.38 811037.7 727044.5 13673206.6
Avg=2734641.32 3915031.72 123.303 8437.47 162207.54 145408 273464.3
             
2005-2009            
Sum=25452692.4 6753672 657.86 16247982.6 917717.8 727044.5 12158907.4
Avg=6363173.1 1350734.4 131.972 28515.268 183543.56 145408.9 2431781.48
             
2010-2014            
Sum=65936409.8 5319311 778.67 18508.1 2213651.1 207825.4 21601670.83
Avg=13187281.96 1063862.2 155.734 37001.82 442730.22 415651.7 4320334.16
             
2015=17109552 1668482 158.36 76335.23 670291.3 511681.4 5200913
Source: Computed on the basis of data from CBN Annual Report.
Trend Analysis
From table 4.1 in appendix 4, the value for the agricultural products have been on the increase from 1970 to 2015 with corresponding rising value of 2576.4 in 1970 to 17109552 in 2015. Table 4.2 above shows five (5) years period for each of the variable used in the study. One-year period is also recorded for 2015. The value for the agricultural products given the five years period and one-year period for 2015 i.e. 1970-1974, 1975-1979,1980-1984, 1985-1989, 1990-1994, 1995-1999, 2000- 2004, 2005-2009, 2010-2014 and 2015 are 16342.2, 36643.2, 82133.9, 221354.3, 908111.6, 4600090.4, 13673206.6, 25452692.4, 65936409.8 and 17109552 respectively. These indicate a rising output from agricultural productivity over the period of time.
In table 4.2 above, the value for the service sector within the period 1980-1984 is 91509.4. The service sector experienced a decrease in output returns in 1985-1989 with a value of 78355.5 as indicated in the table. Thereafter, there exists a continuous increase in the productivity of the service sector. The period 1990-1994, 1995-1999, 2000-2004, 2005-2009 and 2010-2014 have corresponding value of 262207.9, 1241182.3, 13673206.6, 12158907.4 and 21601670.83 respectively and these indicate increase in the services sector productivity.
The Nigeria total external debt as at the first five (5) years period i.e. 1970-1974 was 1218.4. Thereafter, beginning from the following year, there exists a continuous increase Tin the amount of debt ‘owed to the external creditors till 2000- 2004 as indicated in table ‘4.2. Between 2005-2009 and 2010-2014, the amount of external debt dropped to 6753672 and 5319311 respectively. This may be attributed to the debt relief granted to Nigeria by the Paris Club.
As at 1970-1974 the total exchange rate was 3.3042, but there was a decrease in the exchange rate between the period 1975 – 1979 to 3.1169, but throughout the remaining part of each of the five-year period, the exchange rate experienced a continuous increase given in the table 4.2. The continuous rising in exchange rate leads to greater weight on the Nigerian economy by the amount of external debt owed to the external creditors.
The figures for government expenditure on agriculture (GEA) for each of the five years period i.e. 01970-1974, 1975-1979,1980-1984, 1985-1989, 1990-1994, 1995-1999, 2000- 2004, 2005-2009, 2010-2014 and 2015 have been on a steady increase with a corresponding rising value from 39.19, 81.41, 93.4, 322, 3909.77, 67869.71, 142576.34,185009.1 to 76335,23 except the year 2000-2004 where there was decline Of 42187.38. The increase in government expenditure on agriculture has Contributed to agricultural sector productivity as indicated from a rising output in the sectors (table 4.2). However; the, period 2000-2004 had a reduction in output of 42187.38.
In the; case of government expenditure on service sector (GES), for each of the five years period, represent a steady increase over the entire time period. This implies that over time, -.total government expenditure on the service sector yielded higher returns; this will stimulate economic growth.
The Nigeria total external debt servicing (EDS) for each of the five years period, represent a steady increase over the entire time period. This implies that over time, as the total debt stock increases, the amount for external debt servicing rises. This in turn signifies that the output returns in our agricultural and services sector in Nigeria will face a high marginal tax demanded by the external creditors and this will encourage low level of current and future economic growth.
Figure 4.1 Graphical indicators of Trend Analysis 1970 – 2015.

4.2 ANALYSIS OF DATA AND DISCUSSION OF RESULTS
Table 4.3
Descriptive Statistics for agricultural and Service sector model
AGR EXD EXR GEA EDS GES SVR
Mean 2845256 908832.2 53.49086 1028076 113295.8 73626.31 918650.4
Median 145225.3 428058.7 19.66090 92797.40 35024.10 2624.140 44227.30
Maximum 17109552 4890270 158.3600 4710837 670291.3 511681.4 5200913
Minimum 2576.400 175.0000 0.544500 903.9000 73.60000 24.03000 851.9000
Std. Dev. 4848212 1303853 63.25763 1600799 171040.0 149264.4 1573063
Skewness 1.757075 1.653886 0.621992 1.337111 1.904708 2.013460 1.675317
Kurtosis 4.814172 4.710113 1.582876 3.066979 5.970413 5.441224 4.366120
Jarque-Bera 29.32589 25.99845 6.667008 13.41741 43.75312 41.57935 24.54942
Probability 0.000000 0.000002 0.035668 0.000000 0.000000 0.000000 0.000005
Sum 1.28E+08 40897448 2407.089 46263398 5098312 3313184 41339266
Sum Sq. Dev. 1.03E+15 7.48E+13 176067.2 1.13E+14 1.29E+12 9.80E+11 1.09E+14
Observations 45 45 45 45 45 45 45
One of the preliminary investigations of this study included the analysis of the descriptive statistics (mean, median, standard deviation, skewness kurtosis and Jarque-Bera) of the variables, for the sample period of forty-six (46) years. The observed 9tatistics reveal that the time series values of the variables, the standard deviation are found greater than their means (See Table 4.3 above). The mean values of all the variables are larger than the medians, indicating positive skewness of all the variables. The Jarque-Bera (JB test of normality) statistics recorded high positive values of29.32589, 25.99845, 6.667008, 13.41741, 43.75312, 41.57935 and 24.54942 for AGR EXD, EXR, GEA, EDS, GES and SVR respectively and very low probability values indicating that the variables did not have normal distributions. Thus, the null hypothesis (Ho) that the variables are normally distributed or the joint hypothesis that the skewness, S 0 and kurtosis K 3 is rejected. Note that JB is equal to zero (0) if the distribution is normal and that low probability values imply that the JB statistics is significantly different from zero, (Jarque-Bera, 1987).
Figure 4.2 Descriptive Graph for Agricultural Sector Model

Figure4.3 Descriptive Graph for Service Sector

Stationarity of Data
Recent development in econometrics has shown that there are problems associated with ‘time series macroeconomics data analysis due to non-stationarity. Unfortunately, a regression carried out with such non-stationary series gives spurious results and referred Spurious.’ or ‘non-sense’ regression (Alemayehu, Njuguna ; Daniel 2012). To avoid the pitfall of wrong inference from the non-stationary regression, the time series data used in this study were made stationary. Hence, prior to the estimation of the long-run model, the time series properties of the variables, unit root test based on the Augmented Dickey-Fuller test statistic was conducted to determine the existence of unit root. In this study, 5 per cent test critical value is used. Therefore, the results of the test obtained are presented in table 4.4 and 4.5 below.
Table 4.4: Unit root test results at levels using Augmented Dickey-Fuller Criterion
Variables ADF test Statistics at Levels ADF at 5% Critical Value Order of integration
AGR 1.0197 -2.9297 I(0)
SVR 0.7605 -2.9434 I(0)
EXD -1.9583 -2.9297 I(0)
EXR -0.2455 -2.9297 I(0)
GEA 4.2773 -2.9434 I(0)
EDS 3.4854 -2.9332 I(0)
GES 7.2100 -2.9458 I(0)
Source: Researcher’s compilation with information from stationarity test results.
Table 4.5: Unit root test results at first difference using Augmented Dickey-Fuller Criterion
Variables ADF test Statistics at 1st difference ADF at 5% Critical Value Order of integration
AGR -6.5870 -2.9332 I(0)
SVR -3.9314 -2.9434 I(0)
EXD -5.5870 -2.9332 I(0)
EXR -7.1308 -2.9314 I(0)
GEA -6.4609 -2.9297 I(0)
EDS -5.8738 -2.9314 I(0)
GES -5.1387 -2.9321 I(0)
Source: Researcher’s compilation with information from stationarity test results
The results in the table 4.5 above show that agricultural output (AGR), services sector (SVR), external debt (EXD), exchange rate (EXR), government expenditure on agriculture (GEA), government expenditure on the service sector (GES) and external debt servicing (EDS) are only stationary at first difference. This is true given the results in the table 4.4 and 4.5 above as table 4.4 indicates absence of stationarity of the variables at levels. In table 4.5, the critical values at 5 per cent are found less than the Augmented Dickey-Fuller (ADF) test statistic (in absolute terms) at the 5 per cent level of significance. So, the null hypothesis, ‘that the variables have unit root’, following Box-Jenkins (1978) proposition of differencing are however rejected at 5 per cent level of significance. By implication, all the variables are stationary at first difference. Therefore, disequilibrium error terms arising from the regression analysis of the static model are found to be stationary.
Table4.6: The Lag Order Selection Criteria
Lag LogL LR FPE AIC SC HQ
0 -2078.958 NA 8.62e+36 99.23611 99.44297 99.31193
1 -1887.924 327.4866 3.21e+33 91.329733 92.57092* 91.78468*
2 -1864.090 35.18388 3.57e+33 91.38524 93.66076 92.21931
3 -1825.869 47.32095* 2.19e+33* 90.75568* 94.06553 91.96887
* indicates lag order selected by the criterion
The lag ‘length selection criteria such as sequential modified LR test statistic, Final Prediction Error (FPE), Akaike information criterion (AIC), Schwarz information criterion (SC) and Hanna-Quinn information criterion (HQ) in table 4.6 above were used to determine the appropriate lag length. Therefore, the lag length for this study is three as indicated by Final prediction error (FPE) producing the minimum value among the three-majority competing lag length criteria.
Johansen Co-integration Test
Johansen co-integration test allows one to explicitly test for a number of co-integrating vectors in a given estimated model. Hence, to identify the number of co-integrating vectors in the system, the Johansen procedure uses two test statistics: the maximum eigenvalue and the trace statistic. These statistics denote the rejection of a null hypothesis at the 0.05 level. The provision of Johansen co-integration (Unrestricted Co-integration Rank Test — Trace and Maximum Eigenvalue) test results for equation 3.15 confirmed the co-integration of the series at 5 per cent level of significance, whereby Trace and Max-Eigen Statistic indicate 3 and 2 co-integrating eqn(s) respectively at the 0.05 level as showed in table 4.7 below. Therefore, the results show that the Trace and the Maximum Eigenvalue test statistics affirm the existence of a long-run equilibrium relationship among the variables used in the study.
Table 4.7 Unrestricted Co-integration Rank Test (Trace) and Maximum Eigenvalue Results for equation 3.15
Hypothesized No of CE(s) Eigenvalue Trace Statistic 0.05 Critical Vvalue Prob** Max-Eigen Statistic 0.05 Critical Vvalue Prob**
None* 0.8896 163.305 69.8189 0.0000 90.3729 33.8769 0.0000
At most1* 0.6437 72.932 47.8561 0.0001 42.3110 27.5843 0.0003
At most 2* 0.3541 30.6224 29.7970 0.0401 17.9239 21.1316 0.1327
At most 3 0.2232 12.6975 15.4947 0.1264 10.8309 14.2646 0.1629
At most 4 0.0445 1.8665 3.8415 0.1719 1.8665 3.8415 0.1719
Trace and Max-Eigen Statistic indicate 3 and 2 co-integrating eqn(s) respectively at the 0.05 level.
Source: Researcher’s compilation with information from co-integration test results
In the case of model 2, the results in table 4.8 below indicate the Trace and Maximum Eigen statistic of 3 and 2 co-integrating equations (CES) at the 5 per cent level of significance. These also confirm the existence of a long-run equilibrium relationship among the variables used in the study.
Table 4.8 Unrestricted Co-integration Rank Test (Trace) and Maximum Eigenvalue Results for equation 3.17
Hypothesized No of CE(s) Eigenvalue Trace Statistic 0.05 Critical Vvalue Prob** Max-Eigen Statistic 0.05 Critical Vvalue Prob**
None* 0.8568 145.1488 69.8189 0.0000 85.5261 33.8769 0.0000
At most1* 0.4860 59.9427 47.8561 0.0025 29.2843 27.5843 0.0300
At most 2* 0.3320 30.6584 29.7971 0.0392 17.7539 21.1316 0.1393
At most 3 0.2538 12.9046 15.4947 0.1184 12.8816 14.2646 0.0817
At most 4 0.0005 0.0229 3.8415 0.8995 0.0229 3.8415 0.8795
Trace and Max-Eigen Statistic indicate 3 and 2 co-integrating eqn(s) respectively at the 0.05 level.
Source: Researcher’ S compilation with information from co-integration test results.
Stability Test
Figure 4.4 Cusum Test for Agricultural Sector Model (Model 1)

Figure 4.5 Cusum of Squares Test for Agricultural Sector Model (Model 1)

The stability test is performed using Cusum and Cusum of Squares test as shown in figure; 4.4 and 4.5 above. The existence of parameter instability is established if the Cusum goes outside the area between the critical bound (dotted bound) lines. It is estimated at 5 per cent critical level. From figure 4.4 and 4.5 above, can be inferred that the model at 5 per cent level of significance provides stability.
Figure 4.6 Cusum Test for Service Sector Model (Model 2)

Figure 4.7 Cusum of Squares Test for Service Sector Model (Mode12)

The Cusum and the Cusum of Squares test plotted against the critical bound of the 5 per cent significance level show that the Service Sector model has been stable over time given the result by Cusum and the Cusum of Squares test. This is because the observed bound is found lying between the two limits given the results above.

Table 4.9 Long-run Estimates with Agricultural output (AGR) as dependent
Variables Coefficient Std. Error t-Statistics Prob.

C
EXD
EXR
GEA
EDS
R-squared
Adj. R-squared
F-statistic
Prob (F-sta.)
DW Stat. –278789.2
-1.2612
38947.66
17.1947
17.6319
0.9717
0.9689
343.4083
0.0000
1.3107 169158.2
0.1493
5095.394
11.9022
1.6562 -1.6481
-8.4502
7.6432
1.4569
10.6458 0.1072
0.0000
0.0000
0.1529
0.0000
Author’s regression output.
Table 4.10: Parsimonious Error Correction Estimates with Agricultural Output AGR as dependent variable.
Variables Coefficient Std. Error t-Statistics Prob.

C
DEXD
DEXR(-3)
DGEA(-1)
DEDS
ECM (-1)
R-squared
Adj. R-squared
F-statistic
Prob (F-sta.)
DW Stat. -293427.9
-0.3142
1818.504
1.6759
14.0677
-0.7098
0.8953
0.8833
483.2232
0.0000
1.6193 134546.3
0.1116
6538.853
0.2355
1.3222
0.3295 -2.1065
-2.8149
0.2781
7.1154
10.6392
-2.1546 0.0422
0.0079
0.0325
0.0000
0.0000
0.0380
Author’s regression output
Model 1
Table, 4.1 (appendix 4) provides data for the error correction and long-run estimates for model one. The results for the parsimonious error correction estimates of AGR for the entire sample period of 1970 to 2015 reported in table 4.10 show good fit estimates; whereby the value of R2 indicates that 89 per cent of the variations in the Agricultural Sector share of the National Output (AGR) is explained with the set of the explanatory variables used in this study. The F-statistic which measures the joint significant of the regressors in the model is statistically significant at the 5 per cent level.
The results also indicate that only exchange rate (EXR) and government expenditure on agriculture (GEA) lagged by three and one-year period respectively had the expected sign and statistically significant at the 5 per cent level. However, external debt service (EDS) shows direct relationship coefficient, contrary to our a priori expectations but statistically significant at the 5 per cent level, while external debt (EXD) indicates inverse relationship coefficient. Alternatively, the findings indicate that external debt stock in relation to agricultural output contributes negatively to the economic growth in Nigeria. This is because some of the external loans borrowed in Nigeria may not have been properly channelled and utilized to increase the agricultural productive capacity of the economy which in turn would generate returns for the debt repayment and promote economic growth and development. More also, I less emphasis may have been placed on optimal debt management strategies. This result is consistent with the findings particularly with Ogunmuyiwa (2011), Ezeabasili et al. (2011), Olanrewaju, Abubakar & John (2015), Obademi (2012) Who examined the effect of external debt on the economic growth in Nigeria, Fosu (1996) for the case of sub Saharan African countries, also Warner (1992) for the case of 13 less developed countries and Safdari and Mehrizi (2011) for Iran,
The coefficient of exchange rate is 1818.504 and is in conformity with our a priori expectation between agricultural output and exchange rate and is also statistically significant at the 5 per cent level. This means that a high exchange rate increases agricultural productivity because increase in the exchange rate can lead to a rise in the foreign exchange earnings from our agricultural exports. The increase in our foreign exchange earnings arising from agricultural exports through a rise in the exchange rate will further provide the government enough foreign exchange earnings for our agricultural expansion. This finding is contrary to the result obtained by Ijeoma (2013) which indicates that increase in exchange rate reduces growth.
The coefficient of government expenditure on agriculture implies a direct relationship between Agricultural Sector shares of the National Output (AGR) and government expenditure on agriculture (GEA) in Nigeria and is found statistically significant at the 5 per cent level. The results further expressed that increase in government spending in the agricultural sector will lead to more increase in its output. These findings conform to the results obtained by Adetula (2009) who carefully explored the effect of external debt service payment practices on agricultural productivity in Nigeria. His empirical results indicated a significant impact of debt services on agricultural productivity. The, study therefore recommended for more foreign loans for agricultural expansion.
In addition, the coefficient of external debt service indicates a direct relationship with agricultural output (AGR) contrary to our a priori expectation but found statistically significant at the 5 per cent level. This is contrary to our a priori expectation because given the results obtained implies that an increase in external debt servicing will lead to a rise in agricultural output. The reason for this might be that the external loans were optimally utilized that the returns were adequate to meet debt service obligations and use the balance for agricultural productivity. This result is consistent with the findings of Cohen (1993), who examined the dynamic impact of external debt accumulation on private investment and growth in Africa. The results showed that debt servicing is significant and positively correlated with investment. Therefore, the study recommended that the debtor countries should endeavour to meet their debt service obligation.
The value of Durbin-Watson (DW) statistic obtained in this study which is used to ascertain the existence of serial correlation is 1.6193. This implies absence of serial correlation because the closer the DW value is to 2.0 the better the evidence of the absence of serial correlation. It also shows that the rule of thumb of DW is equal to 2.0 being the case of no auto-correlation is fulfilled because I .6193 being the value for DW can be approximated to 2.0. With this, we reject the hypothesis that there is presence of serial autocorrelation in our model. Therefore, parameter estimates from our model are stable, consistent and efficient.
The coefficient and the t-statistic of the error correction mechanism (ECM) are negative and statistically significant at the 5 per cent critical level. The ECM values show that the short-run model will adjust back to the long-run relationships. More-also the significance of the ECM is an indication and a confirmation of the existence of a long run equilibrium relationship between Agricultural Sector shares of the National Output (AGR) and its determinants used in this study.
The long run result of this study was estimated from equation (3.15) and presented in table 4.9 above. The results reveal that all the variables used in the model except external debt and external debt servicing met our a priori expectation. The result further shows that only the government expenditure on agriculture is not statistically significant in explaining systemic variation in agricultural output in Nigeria within the period of our study, hence we reject the hypothesis of no significant relationship except for government expenditure on agriculture. More also, the results show that the coefficient of external debt (EXD) is -1.2612. This implies an inverse relationship between agricultural output and external debt. This also means that the external loans borrowed in Nigeria from the external creditors within the period of study never yielded growth. The reason for this might be due to poor external debt management policies.
The coefficient of exchange rate (EXR) obtained in our long-run estimate is 38942.66 and this implies a direct relationship between exchange rate and agricultural output. The coefficient of government expenditure on agriculture (GEA) is 17.1947 and it indicates a direct relationship between agricultural output and government expenditure. The reason for this is that government expenditure in our agricultural productivity may have been properly monitored to ensure higher output return. The external debt service (EDS) has a coefficient value of 17.6319 and this implies a direct relationship between agricultural output and external debt service. The reason for this might be that the increase in output returns from government expenditure in agriculture enabled external debt service obligations.
Table 4.11: Long-run Estimates with Service Sector (SVR) as dependent variables
Variables Coefficient Std. Error t-Statistics Prob.

C
EXD
EXR
GES
EDS
R-squared
Adj. R-squared
F-statistic
Prob (F-sta.)
DW Stat. -42420.98
-0.8216
12144.29
4.0595
2.6049
0.9514
0.9484
511.5607
0.0000
1.4147 47055.31
0.0508
1445.779
0.7913
0.6601 -0.9015
-6.3304
8.3998
5.1300
3.9462 0.3726
0.0000
0.0000
0.0000
0.0000
Author’s regression output.
Table 4.12: Parsimonious Error Correction Estimates with Service Sector (DSVR) as dependent variable
Variables Coefficient Std. Error t-Statistics Prob.

C
DEXD
DEXR(-1)
DGES
DEDS(-3)
ECM (-1)
R-squared
Adj. R-squared
F-statistic
Prob (F-sta.)
DW Stat. -825.2117
0.0412
0.1061
0.2313
0.0390
-0.8608
0.9246
0.9133
805.5486
0.0000
1.8943 17838.48
0.0106
0.0249
0.0370
0.3686
0.1387 -0.0462
-3.8606
4.2654
6.2464
-2.1059
-2.6007 0.9635
0.0008
0.0003
0.0000
0.0266
0.0163
Author’s regression output.
Model 2
Table 4.1 ‘in appendix 4 provides data for the error correction and long-run estimates for the service sector model. The results for the parsimonious error correction estimates of SVR as dependent variable in the model for the entire period of 1970 to 2015 reported in table 4.12 show good fit estimates; whereby the value of R2 indicates that 92 per cent of the variations in the Services Sector (SVR) is explained by the set of the explanatory variables used in this study. The F-statistic shows overall significance of the model. It was found to be significant at 5 per cent level, as the probability value of (0.0000) has shown. We therefore, reject the null hypothesis that the model is not significant in explaining variation in Service sector.
From the estimated parsimonious error correction model, the results indicate that external debt (EXD) shows direct relationship coefficient which is in line with our a priori predictions, On the other hand, the findings indicate that external debt stock yields increase in output returns in the service sector. The reason for this is that some of the external loans borrowed in Nigeria may have been properly channelled to the services sector and well utilized to increase the productive capacity of the Services Sector in the economy which in turn had generated returns for the debt repayment and promote economic growth and development. More also, more emphasis might have been placed on optimal debt management strategies. Fortunately, these findings conform with the results obtained by Ramakrisna (2012) who empirically examined the effect of external debt on the service sector and agricultural growth of the Ethiopia economy using time series data for the period of 1981 – 2012. The results revealed that external debt has contributed positively to the growth of the services Sector in Ethiopia economy and our results-are-in agreement with the findings of Ramakrisna (2012). This is contrary to the apprehensions about public external debt that it does not have significant influence on economic growth.
The coefficient of exchange rate lagged by one-year period is 0.1061. This shows a direct relationship between the exchange rale and the service sector and is in conformity with our a priori expectation. The interpretation of this result is that an improvement in the value of service sector is being influenced by depreciation of exchange rate in the current periods. The reason for, this is that, at a higher exchange rate, the service sector charges higher tariff on the services provided to their consumers, So as a result of this, the service sector earns higher total revenue that will bring about growth in the sector, Therefore, the significance of the exchange rate in explaining the service Sector productivity caused by the depreciation of the naira exchange rate has led to the increase in tariff thereby enable the services sector to earn higher amount of total revenue. By implication, the government is left with more resources to finance the service sector growth. These findings did conform to the result of Imimole, Imougbele and Okhuese (2014) who empirically shown in their study that exchange rate has a significant impact on external debt in Nigeria.
The coefficient of government expenditure on the service sector (GES) at the current year period is 0.2313. This implies a direct relationship between the services sector (SVR) and government expenditure on the sector in Nigeria and is statistically significant at the 5 per cent level. The results further expressed that increase in government spending in the service sector will lead to more increase in its output. This is because government expenditure in the service sector in Nigeria have been properly managed.
Moreover, the coefficient of external debt service lagged by three-year period indicates a direct relationship coefficient of 0.0390 contrary to our a priori expectation but found statistically significant at the 5 per cent level. The contrary to our a priori expectation, given the results obtained imply that an increase in external debt servicing, will lead to a rise in the service sector productivity. This is attributed to the fact that external loans were well channelled and optimally utilized to increase the productive capacity in the service sector that the returns were adequate to meet debt service obligations and use the balance for service sector growth. This result conforms to Ramakrisna (2012) who empirically examined the effect of external debt on the service sector and agricultural growth of the Ethiopia economy using time series data for the period of 1981-2012. The empirical results revealed that the external debt servicing have contributed to the growth of service sector in Ethiopia. The study recommended that government should continue with the existing service sector policies.
The Durbin Watson for, autocorrelation shows absence of serial autocorrelation. This is because the calculated value of DW (1.8943) can be approximated to 2.0. With this result, we can reject the hypothesis that there is presence of serial autocorrelation in our model. Therefore, parameter estimates from our model are stable, consistent and efficient.
The coefficient and the t-statistic of the error correction term (ECM) in our model 2 are negative and statistically significant at the 5 per cent critical level. The ECM values show that in the short-run, the economy will adjust back to the long-run relationships. More-also, the significance of the ECM is an indication and a confirmation of the existence of a long run equilibrium relationship between the services sector and its determinants used in this study.
The long run result of this study was estimated from equation (3.17) and presented in table 4.11 above. The results reveal that all the variables used in the model except external debt’ and external debt servicing met our a priori expectation. The result further shows that government expenditure in the service sector is statistically significant in explaining systemic variation in the service sector productivity in Nigeria within the period of our study, hence we reject the hypothesis of no significant relationship. In this regard, the coefficient of external debt (EXD) is ‘0.3216. This indicates an inverse relationship between service sector and external debt. The reason for this is that external loans allocated to the services sector may not have been properly managed to enhance the services sector productivity.
The coefficient of exchange rate (EXR) is 12144.29 and it signifies direct relationship with the service sector. It is also found statistically significant at 5 per cent level. The coefficient of government expenditure in the service sector (GES) is 4.0595 and this shows a direct relationship between the services sector and its government expenditure. Government expenditure in the sector on the provision of services sector factor inputs can influence the level of service sector performance in Nigeria. The coefficient of external debt service (EDS) is 2.6049; it shows a direct relationship with services sector. It is statistically significant at the 5 per cent level.
The reason for this might be that external loans allocated to the service sector may have been properly utilized in the service sector productivity thereby yielding higher output and this will enable the government to meet the debt service obligations and uses the balance for the service sector growth.
4.3 POLICY IMPLICATION OF RESULTS
With regard to the results obtained in our study, our estimated models perform well as all the variables satisfied our a priori expectations except external debt which did not conform with agricultural output. However, exchange rate and government expenditure on agriculture were found significant determinant of agricultural output in Nigeria. The other variables that significantly influence the service sector in Nigeria are government expenditure on the service sector, external debt, exchange rate and external debt service.
From the foregoing therefore, the issue of external debt for a developing country like Nigeria will continue to exist in the agenda of economic policy. The reasons for this are not far-fetched, because our domestic resources may not be enough to fill the gap of resources inherent in a nation that is experiencing economic catch up with the rest of the world. This is evident from the results obtained as external debt failed to Yield increase in output return in the agricultural productivity. The second reason is that Nigeria has also had a bad history with its external debt positions.
These notwithstanding, Nigeria’s economic policy makers still believe that external borrowing is a viable option for financing the deficit gap. This is unacceptable, if the government is in hurry to catch up with the rest of the world in the development game; the government should reduce its finances on unproductive consumption and focus its efforts to finance productive investment like agriculture and service sectors.
The results of our estimated model reveal that exchange rate was a major factor that influences agricultural productivity in Nigeria, Garba, (2014) and Obademi, (2012) have argued that the external debt problem of the less developed countries (LDCs) was due to their inability to earn sufficient foreign exchange to finance their development, hence it is an exchange rate problem. The policy option here lies in the diversification of the economy from agricultural based exports to technologically driven export products. Thus, the government needs to support local manufacturers in order to increase local content in the economy. This will be an added advantage of increasing the source of government revenue to finance agricultural productivity and the service sectors.
The results also reveal that government expenditure on agriculture and service sector remain another major determinant of agricultural output and the service sector productivity in Nigeria. There is no scarcity of white papers from the talk shops on the need for government to increase its expenditure in the agricultural sector to enable the sector have enough fund to finance its productive capacity. The problem lies on the implementation; it is right time for government to act decisively so that economic growth for the present and the future generation can be met. In fact, external debt need not lead to low economic growth if the loans are properly utilized on productive investment like agriculture and the service sectors which will generates greater output. When foreign loans are spent on unproductive projects, their effects on the macroeconomic performance will remain low.
CHAPTER FIVE
SUMMARY, CONCLUSION, RECOMMENDATIONS AND CONTRIBUTION TO KNOWLEDGE
5.1SUMMARY
This study has traced the impact of external debt on the agricultural sector share of national output (AGR) and the service sector (SVR) growth in Nigeria for the period 1970 to 2015. The study used trend analysis, descriptive statistics, co-integration test and the error correction mechanism to investigate the long-run as well as short-run relationship among the variables used in this study. The findings of this research indicate that all the variables are stationary at their first difference, implying the rejection of null hypothesis (Ho) that the variables have unit root. In addition, a co-integration test was carried out on the endogenous variables which show a rejection of the null hypotheses at the 5 per cent level.
There is an inverse relationship between the external debt (EXD) and agricultural output (AGR) and this indicates that external loans obtained in Nigeria over the years have not brought about positive cumulative progress that could form the springboard for sustainable development in our economy. This confirms and supports the existence of the debt over-hang hypothesis in Nigeria. A direct relationship between external debt and the service sector was found and this indicates that external loans obtained in Nigeria over the years of study have brought about Positive cumulative progress in the service sector in Nigeria. Our results in this study also confirms a direct and significant relationship between exchange rate, government expenditure, external debt servicing, and also between agricultural output and the service sector, meaning that each of the variable stated above yields increase in output returns in the agricultural and service sector in Nigeria economy.
5.2 CONCLUSION
The empirical analysis based on the error correction mechanism estimate, revealed that external debt has a negative impact on the agricultural output, but it has positive effect on the service sector.
However, the country should not denounce external borrowing completely because, if the loans are properly utilized it can lead to accelerated economic growth in Nigeria. Be that as it may, the Nigerian policy makers need to appraise the present debt Situation of the economy in order to appreciate enormity of this problem.
Furthermore, if external loans are properly monitored and utilized for agriculture and the Service sectors, it can create a good road map for Nigeria to have additional resources to fast track the nation’s economic development.
5.3RECOMMENDATIONS
Based on the results the following recommendations are made.
The use of external borrowed funds for agricultural productivity and the service sector must be closely monitored in order to ensure that the acquired loans are channelled to the productive sector of the economy.
However, with the continuous accumulation of the external debt stock, the country should reduce its non-concessional borrowing. The debt strategy for the public sector should be monitored in such a way that it promotes growth.
5.4 CONTRIBUTION TO KNOWLEDGE
The short run results of error correction technique will enhance the quality of external debt and debt service policies on the one hand and agricultural and service sectors on the other.
This research work will improve the existing literature on external indebtedness and debt services on agricultural output and service sector in Nigeria.
Applying the co-integration test on external debt, debt service, agricultural output and service sectors, establishes the long run understanding of external debt on agricultural and service sector in Nigeria.
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APPENDIX I
Related research studies on the impact of external debt on the growth of agricultural the service sectors in Nigeria.
AUTHOR TITLE METHOD RESULT SOURCE
Adesola, W. A. (2009) The effect of
external debt
service
payments on
the economic
growth
in
Nigeria 1981 – 2004. Ordinary Least
Squares (OLS)
multiple
regression
technique. The results found out that debt service payments have negative impact on economic growth. ©The Pakistan
Development
Review 51:4 Part 11
(Winter 2012) pp.
51:79-96
Adegbite, E. O. et al. (2008) The impact of
the Nigeria’s
huge external
debt stock on
its economic
growth 1975 –
2005. Using both
ordinary least
squares and
generalized
least squares Their results found out that external debt contributes positively to growth up to a certain point, after which its contribution becomes negative. The results further stressed that
Nigeria’s large debt burden did indeed “crowd out” investment. Abu Siddique,
Business School,
The University of
Western Australia
E A Selvanathan,
Griffith Business
School, Griffith
University, and
Saroja
Selvanathan,
Griffith Business
School, Griffith
University 27
March
2015.
DISCUSSION
PAPER 15.10
Onwioduokit, H. (1998). The impact of
foreign debt on economic growth in Nigeria. Co-integration estimation technique The results found out that the degree of responsiveness of growth to external finance in Nigeria is elastic International Journal of Humanities and Social Sciene Invention. Volume 2 Issue 61 June, 2013.

Ogunmuyiwa, M.S. (2011) The effect of
external debt
on economic
growth Nigeria. Co-integration statistical technique The results revealed that no causality exist between external debt an economic growth in
Nigeria. Journal
Business
of
Management and
Administration
vol. 3(1): pp.1-5,
March, 2015
Sulaiman, L.A. and Azeez, B.A. (2012) The effect of external debt on economic of growth Nigeria. Co-integration estimation technique The findings show that external debt has contributed positively to the Nigerian economy. Journal Business
of Management and
Administration vol. 30): pp.1-5, March, 2015
Okolie O, R. (2014) External Debt Crisis, Debt Relief and Economic Growth: Lessons from Nigeria Descriptive survey/content analysis. The findings revealed that lack of fiscal discipline, which was due to lack of integrity and accountability, over dependence on oil revenue and poor project
analysis and implementation were factors responsible for the Nigerian debt crisis in the past. It conclude that the debt relief has not translated into the much
desired economic growth and development and recommends that strict policy guidelines should be adhered to in order to prevent future debt overhand. European Journal of Business and Management Vol.6, No.33, 2014
Obademi, O.E. (2012) An Empirical
Analysis of the
of Impact Public Debt on
Economic
Growth: Evidence from
Nigeria. 1975-
2005 Co-integration estimation technique The result showed that the joint impact of debt on economic growth is negative and quite significant in the long-run though in the short-run the impact of borrowed funds and coefficient of budget deficit is positive. In the study, the speed at which the short-run equation converges to equilibrium in the long-run as shown by the Error Correction Mechanism coefficient was found to be slow. The conclusion from this study is that though in the short-run the impact of borrowed fund on the Nigerian economy was positive, the impact of debt in the long-run depressed economic growth as a result of incompetent debt management. Canadian Social
Science Vol. 8, No. 4, 2012, pp. 154-161.
DOI: 10.3968/j.css
.19236697201208
04.350
Ndubuisi, A. (2011) The Effect of External Debt
Relief on
Sustainable Economic Growth and Development in Nigeria Ordinary Least
Squares (OLS) The results found out that there is a positive relationship between external debt relief and economic growth in Nigeria and that this will help to bring back a healthy economy for the nation. An International
Journal of Arts and Humanities
Bahir Dar Ethiopia. vol. 2 (3), S/N0 7, July, 2013: 165-191
Essien, E.A. and Onwioduokit, E.A. (1998) The impact of external debt on economic growth in Nigeria. Error Correction Estimation Technique The results indicate the rejection of the null hypothesis with the conclusion that the high debt burden has been the root cause of Nigeria’s sluggish growth. International Journal of Business and Management. Vol. 6, No.5; May 2011
Obadan, M. I. (1991) The relationship
between foreign debt and economic growth in Nigeria Descriptive
technique of
analysis He observed that foreign debt can increase resources available for investment by supplementing and domestic savings augmenting foreign exchange earnings of the country. According to Obadan (1991), a country’s foreign borrowing requirements depend on its total expenditure in relation to her total domestic production. For foreign borrowing to impact positively on economic growth, it must add to domestic savings and investment. Furthermore,
Obadan asserts that for a country to reduce her foreign loan requirements, it has to increase her domestic savings sufficiently enough to sustain her desired target rate of growth
International
Journal Business
of and Management Vol.
6, No. 5; May 2011
Ezeabasili, V. N. et al. (2011) The relationship between Nigeria’s external debt and economic growth 1975 – 2006 An error correction estimates. The result of error correction estimates revealed that external debt has negative relationship with economic growth in Nigeria. For example, a one per cent increase in external debt resulted in a decrease of 0.027 per cent in Gross Domestic Product, while a 1 per cent increase in total debt service resulted to 0.034 per cent decrease in Gross Domestic Product. These relationships were both found to be significant at the 10 per cent level. In addition, the Granger Causality test revealed unidirectional causality exists between external debt service payment and economic growth at the 10 percent level of significance. International Journal of Science
and Research (IJSR) Index Copernicus Value (2013): 6.14 Impact Factor (2013): 4.438
Ajayi, L.B. ; Oke, M.O. (2012) The effect of external debt burden on economic growth and development
of Nigeria Ordinary Least Squares (OLS) The finding indicated
that external debt burden had an adverse effect on the per capital income of the nation International Journal of Business and Social Science. Vol. 3 No. 12 Special Issue – June 2012
Ijeoma, N. B. (2013) An Empirical
Analysis of the
Impact of Debt
on the Nigerian
Economy 1980
– 2010. Ordinary Least Squares (OLS) The study found that Nigeria’s external debt stock has a significant effect on her economic growth. It also revealed that there is a significant relationship between Nigeria’s Debt service payment and her Gross Fixed Capital Formation. An International
Journal of Arts and Humanities
Bahir Ethiopia
Dar, vol. 2 (3), S/No. 7, July, 2013:165-191
Adenike, A. Adekunle, O. ; Abiodun, K. (2007) The effect of external debt management on sustainable economic growth and development: Lessons from
Nigeria Descriptive statistics/ content analysis The descriptive or content
Analysis shows that, availability or access to external finance strongly influences the economic development process of any nation. Debt is an important resources needed to support sustainable economic growth. but a huge external
debt without servicing as it is the case of Nigeria before year 2000 constituted a major impediment to the revitalization of her shattered economy as well as the alleviation of debilitating poverty. www.mpra.ub.uni-muenchen.de/2147 /MPRA paper No. 2147, posted 9, March 2007
Ibi ; Aganyi, (2014) Impacts of external debt on economic growth in Nigeria Variance decomposition and impulse response from Vector Auto- Regression (VAR) The result reveals that causation between external debt and economic growth is weak in the Nigerian context and external debt could thus not be used to forecast improvement or slowdown in economic growth in Nigeria. Hence, changes in
GDP cannot be predicted with changes in external debt. Journal of Business Management and
Administration
vol. 3(1): pp.1-5,
March; 2015
http://www.peakjo
urnals.org/sub-
journals-
JBMA.htm1
ISSN: 2329-2954
Ishola, Olaleye, Ajayi ; Giwa (2013) External Debt and the Nigerian Economy: an Empirical Analysis 1980 -2010 Ordinary least squares regression technique Our result indicates that 12.3% changes in economic growth is caused by external debt and prime lending rate. International Journal of Humanities and Social Science Invention Volume 2 Issue 6th June, 2013, pp.42 – 50
Brownson, Vincent, Emmanuel ; Etim (2012) The impact of external debt on the growth of agricultural sector in the Nigerian economy. Ordinary Least Square (OLS) estimator technique The results of their study revealed that the coefficient of the external debt has an inverse relationship with the agricultural output but significant at the 0.05 per cent level. This implies that
at the aggregate level, external debt adversely affects agricultural growth and the causality is a un-directional one International Journal of Finance Research. Vol. 1, No. 1; December 2014
Garba, S. B. (2014) An Empirical
Analysis of the
Relationship
between Government
External
Borrowings and Economic Growth in
Nigeria Ordinary Least Squares The result showed that external debt has a fairly significant positive relationship with the gross domestic product. International
Journal of Finance
and Accounting
2014, 3(4): 235-
243
DOI:
10.5923/j.ijfa.2014
0304.03
S. O.,
B.N and E. O Budget deficit,
external debt and the growth of the Nigerian economy 1970
-2003. Content analysis The finding confirmed the existence of the debt Laffer curve add the nonlinear effects of external debt on growth. The study concluded that if debt –
financed budget deficits are operated in order to stabilize the debt ratio at the optimum
sustainable level, debt overhang problems would be avoided and the benefits of external borrowing would be maximized. American
International
Journal of
Contemporary
Research Vol. 4,
No. 6; June 2014
Olanrewaju, M.H., Abubakar, S. ; John, A. (2015) Implications of
External Debt
on the Nigerian
Economy: Analysis of the
Dual Gap Theory 1986 – 2013. The ordinary least squares. The results reveal that the impact of government debt on economic growth over the period under review is insignificant – with external debt which has been enormous over the years contributing minimally to real gross domestic product. Journal Economics
Sustainable of and
Development ISSN 2222-1700
(Paper). ISSN
2222-2855. (Online). Vol.6, No. 13, 2015: 238
APPENDIX 2
Related research studies on the impact of external debt on the growth of agricultural and services sectors in developing countries.

AUTHOR TITLE METHOD RESULT SOURCE
Fosu, A. K. (1996) The relationship
between economic growth and external debt
in sub Saharan African countries
1970-1986 Ordinary Least Squares (OLS) The result reveals that direct effect of debt hypothesis shows that GDP is negatively influenced via a diminishing marginal productivity of capital. The study also finds out that on the average a high debt country about one percent faces reductions in GDP growth annually International Journal of Finance
and Accounting 2014
Ramakrishna, R. (2012) Sector Service
Growth, Public External Debt and Economic Growth: a relook
into Experience
Ethiopia 1981-2012 ARDL integration
co-technique and the error correction model The empirical evidence shows that service sector growth and agricultural sector growth have contributed positively to the economic growth of Ethiopia Professor, Dept. of
Economics, Osmania University
Email: [email protected] com
Warner, A. M. (1992) The size of debt
crisis effect on agricultural output of 13 less developed countries over the period 1982-1989. Ordinary Least Squares (OLS) The results revealed that the coefficient of agricultural output has an inverse relationship with external debt and is not statistically significant at 5 per cent level.
He affirmed that the reasons behind the decline in agricultural output are attributed to declining export prices. International Journal of Finance and Accounting 2014
Qureshi, M. and Ali, S. (2011) The relationship between public debt and economic growth in Pakistan over the period 1981-
2008. Ordinary Least Squares (OLS) The results shown that an inverse relationship exists between external debt and economic growth in Pakistan. Journal of Economics and
Sustainable
Development
ISSN 2222-1700
(Paper)
ISSN 2222- 2855 (Online)
vol.6, No.13, 2015
242
Rockberbie, D.W. (1994) The effect of debt crisis on investment in the less developed countries 1965-
1990 Ordinary Least Squares (OLS) The results affirm that the debt crisis of 1982 had significant effects in terms of dramatic slowdown of investment in less developed countries. International Journal of Humanities and
Social Science
Volume 2 Issue 61
June, 2013
Mukhopad hyay, P. (1995) The impact of external debt on economic growth of the developing countries, i.e. Argentina, Brazil,
Columbia,
Equador, Mexico,
Philippines,
Thailand, and
Uruguay 1971 –
1992. Autoregressive
Distributed Lag Approach
(ARDL). The results shown that rapid growth of external debt crowed out investment through their effects on both demand and supply of credit. International Journal
of Finance and
Accounting
2014,
3(4): 235-243 DOI:
10.5923/j.ijfa.201403
04.03
Hammed, A. Ashraf, H. ; Chaudhary, M.A. (2008) The relationship between external debt and economic growth in Pakistan. 1970
– 2003 Vector Error Correction Mechanism The long-run relationship shows that debt service affects gross domestic product negatively, most likely through its adverse impacts on capital and labour productivity. Granger causality of the vector error correction model further indicates that short- and long-run causality runs from debt service to gross domestic product. Abu Siddique, Business School, The of University Western Australia E. A. Selvanathan, Griffith School, Business Griffith University, and Saroja Selvanathan, Griffith Business School, Griffith University 27 March
2015. DISCUSSION
PAPER 15.10
M.A. The impact of external debt on economic growth
in sub-Saharan
African countries.
1970 -1994 Simulation approach
2 Stages Least Square The results found out an inverse relationship between debt overhang, crowding out and investment, thereby concluding that external debt depresses investment through both a “disincentive” effect and a “crowding out” effect, thus
affecting economic growth Administrative and
Financial Sciences
Faculty, Petra
University, P.O. Box
961343, Postal Code
11196, Amman, Jordan
The relationship between external debt, Investment and growth in 55 income low countries 1970 -1999. Panel data The results show that more than a certain threshold more debt leads to a negative rate of growth JEI Classification
Number F34 H63
011, 019 marco
[email protected]
Public debt and productivity. The difficult quest for growth in Jamaica The model uses Panel data approach. The results support a nonlinear relationship between productivity and total public debt. The coefficient on the public debt term is positive and generally significant, suggesting that low levels of debt are positively associated with productivity. ©2006 International
Monetary Fund
WP/06/235
IMF Working Paper
Western Hemisphere
Department
Causality between Economic Growth, Export, and External Debt Servicing: The Case of Lebanon 1970-2010. Granger causality test. The results show that both short run and long run relationships exist among these variables. Moreover, the finding suggests, i) bidirectional Granger causality between GDP and external debt servicing, ii) unidirectional Granger causality that runs from external debt to exports, iii) unidirectional causality running from exports to economic growth, and iv) unidirectional causality running from exchange rate to economic growth. International Journal
of Economics and
Finance; Vol. 4, No.
11; 201 Published by
Canadian Center of
Science and Education.

Were, M. (2001) The relationship between external service debt and payment economic growth in Kenya. Error Correction
Mechanism
(ECM). The results confirmed that external debt service has a negative effect on growth of the economy of Kenya. Therefore the study concludes that debt phenomenon overhang happened to this country A Thesis Submitted
to the Department of
Economics. Addis
Ababa University
Ababa, Addis Ethiopia, June 2014
Safia and Shabbir (2009) The impact of external debt -on
economic growth in 24 developing countries 1976 –
2003 Random effect and fixed effect Panel data The results showed that debt servicing to GDP negatively affect the economic growth and may leave less funds available to finance private investment in these countries leading to a crowding out effect. International
Educational Research
2013 vol.l
Kasidi and Said (2013) The impact of external debt on economic growth of Tanzania 1990 –
2010. Error correction estimate The results revealed that the impact of external debt and external debt service on GDP has a direct relationship and is statistically significant at the 5 per cent level. The co- integration test illustrations are that the external debt and GDP have long run relationship. International Journal and of Science (IJSR)
Research Index Copernicus Value (2013): 6.14 | Impact Factor (2013):4.438
Hassan, A. and Butt, S. (2008) The impact of
external debt on
economic growth
in Pakistan 1975
– 2005 Autoregressive
Distributed Lag
Approach
(ARDL). The findings indicate that total debt accumulation is not an important determinant of economic growth either in short or in the long-run. The reason for this, is as a result of the fact that the contracted loans may not have been optimally deployed to enable the return on investment meet its maturity obligation. © The Pakistan Development Review
51:4 Part II (Winter
2012) pp. 51:4, 79-
96
Safdari and Mehrizi (2011) The effect of
external debt on
the economic
growth in Iran
(1974 – 2007). Ordinary Least
Squares (OLS) estimation technique. The results showed that external debt and imports have an inverse relationship with GDP and is not statistically significant in explaining the economic growth in Iran. International Journal
and Science of (IJSR)
Research Index Copernicus Value (2013): 6.14 | Impact Factor (2013):4.438
Azam, M., Emirullah, C., Prabhakar. A.C. and Khan, A.Q. (2013) The Role of External Debt in Economic Growth of Indonesia. A Blessing or Burden? Ordinary Least Squares The main findings of the result shows that external debt has a negative impact on economic growth during the period under study. Thus, external debt is not a blessing but rather a burden to Indonesia Middle-East Journal of Scientific Research 18 (8): 1111 – 1118, 2013. ISSN 1990-9233
© IDOSI Publications, 2013.

Younis Sazan ; Shvan (2015) The Impact of External Debt on Economic Growth: Empirical Evidence from
Iraq 1980-2014 ARDL approach The results found out that external debt had a negative impact on gross domestic product (GDP)
International Journal
of Science and
Research (IJSR) Index Copernicus Volume 4 Issue 8, August 2015
Mulugeta, F. (2014) The Impact of External Debt on Economic
Growth Ethiopia 1983 – 2013. Maximum Likelihood approach and Vector error correction model
(VECM) The empirical results show the existence of long-run between real GDP and external debt. The results of the study also reveal that external debt negatively affects the GDP. A Thesis Submitted to the department of Economics. Addis Ababa University Addis Ababa, Ethiopia; June 2014.

Faraji, K. and Makame, A, S. (2013) The impact of external debt on economic growth in Tanzania for
1990-2010. Error correction Mechanism The results revealed that there is a significant impact of the external debt on GDP. The total external debt stock has a positive effect of about 0.37 but debt service payment has a negative effect of about 28.52. They so found that there was no long-run relationship of the external debt and GDP from the co-integration test. Journal of Economics
and Sustainable
Development ISSN
2222-1700 (Paper)
ISSN 2222-2855
(Online)
vol.5, No.20, 2014
APPENDIX 3
Related research studies on the impact of external debt on the growth of agricultural and services sectors in developed countries.

AUTHOR TITLE METHOD RESULT SOURCE
Grotgiev, B (2012) Implications of public debt on Economic growth and development in Italy and Portugal 1980 – 2012. An European study. Panel data regressions The results show that public debt accumulation has a significant negative effect on economic growth. It found out that as economic growth slowdown, it leads to an increase in the budget deficit through reduced public revenue, leading to new debt issuance. As debt piles up the cost of debt and its servicing increase substantially, leading to a decrease in investment levels thus influencing negatively on long term growth. The results also show that debt does not influence economic growth directly, but crowds out investments through higher interest rates. As a result investments decrease. Thesis presented to the department of economics and business studies. Aarhus School of
Business and Social
Sciences, Aarhus University. May, 2012
Mencinger, J., Aristovnik, A. ; Verbic, M. (2014) The Impact of Growing Public Debt on Economic Growth in Finland and Denmark
(European Union) 1980 – 2010 Panel data approach. The results across all models indicate a statistically significant non-linear impact of public debt ratios on annual GDP per capita Further, the Growth rates.
calculated debt-to-GDP turning point, where the positive effect of accumulated public debt inverts into a negative effect, is roughly between 80% and 94% Faculty of Economics, University of Ljubljana, Slovenia ; Institute for Economic Research, Ljubljana.

Reinhart, C. M. ; Rogoff, K.S. (2010) The impact of government debt on GDP growth rate of
20 advanced and 24 emerging countries (1790 – 2009). Simple correlation statistics The results indicate that below a threshold of 90% of GDP debt has a positive but weak impact on the long-term GDP growth rate, whereas the effect of debt above 90% is negative and significant. Faculty of
Economics,
University of
Ljubljana,
Slovenia ;
Institute for
Economic
Research,
Ljubljana.

Kumar, M.S. and Woo, J. (2010) The effect of external debt on growth of 38 developed countries 1970 –
2010. Panel data The results confirmed a nonlinear relationship between the initial level of government debt and subsequent GDP growth Faculty of
Economics,
University of
Ljubljana,
Slovenia ;
Institute for
Economic
Research,
Ljubljana
Murat, C. G. and Dilek, T. (2015) The impact of
external debt on
economic growth
in Turkey 1971 –
2011. An ARDL
bound testing
approach The findings obtained from long-run analysis reveal that the external debt has a negative and statistically insignificant effect on economic growth. On the other hand, the results of error correction model show that the external debt, in the short run, has a negative and Statistically significant effect on economic growth. The significance of these empirical results is that the external debt did not affect the economic growth in the long run while the external debt which was not used in effective areas affected the economic growth negatively in the short run. Paradoks
Economics,
Sociology
and Policy
Journal
Ocak/January
2015,
Cilt/V01: 11,
Sayl/Num: 1
Sayfa/Page: 65-87
Cristina, C. Checherita, B. ; Philipp, R. (2010) The impact of high and growing government debt on economic growth. An empirical investigation for the Euro area 1970-2011. 2-SLS (two-stage least square) The results found out a non-linear
impact of debt on growth with a
turning point – beyond which the
government debt-to-GDP ratio has
a deleterious impact on long-term
growth—at about 90-100% of
GDP. Working
paper series
European
Central
Bank, 2010
Address
Kaiserstrasse
29
60311
Frankfurt am
Main,
Germany
Ayudi, S. M. (2008) The impacts of external debt on economic growth of South Africa and Nigeria. Content analysis Their result showed that the negative impact of debts on growth is confirmed in South Africa and Nigeria, whereas South Africa performs better than Nigeria in the application of external loans to promote growth. International
Interdisciplinary
Journals of
Contemporary
Research on
Business
MAY 2014
VOL 6, NO
Schclarek, A. (2004) The relationship between gross government debt and GDP growth rate in developed countries 1970 – 2002. Content analysis The researcher opines that no robust evidence of a statistically significant relationship was found for a sample of 24 industrial countries for the year periods between 1970 and 2002. European Central Bank working paper series No. 1237. August, 2010
Antomio, M. amd Jose, I (2014) The Role of Government Debt
on Economic Growth in 14 European countries 1970 –
2012. Panel data technique Results show a negative impact of -0.01% from 1% increase in public debt Lisboa School of Economics ; Management,
Dept. of
Economics.

Irina, B. (2015) Economic consequences of external debt. The case of Central and
Eastern European
Countries. 1994-
2013 Panel data estimation technique The results of the study confirm a between relationship positive external debt and economic growth of the central and easterner European countries Alexandru
Ioan Cuza
University of
Iasi; e-mail:
[email protected] aic.ro.

Ferreira, C. (2014) Debt and economic growth in the European Union: what causes what?
(28 European Union countries) – Austria,
Luxembourg Panel Granger Causality Estimations The results obtained show statistically relevant bi- directional causality relations between public debt and economic growth Lisboa School of Economics ; Management Dept. of Economics.