Impact of Debt Servicing on Economic Growth in Nigeria

This study examines the impact of debt servicing on economic growth in Nigeria using quarterly time-series data spanning 2012Q1 to 2024Q4. The study specifically investigates the impact of multilateral, bilateral, and commercial debt servicing on Gross Domestic Product (GDP). An ex-post facto research design was adopted, relying on secondary data sourced from the Central Bank of Nigeria (CBN), Debt Management Office (DMO), World Development Indicators (WDI), and the International Monetary Fund (IMF). Independent variable (multilateral, bilateral, and commercial debt) while dependent variable (Gross Domestic Product GDP). The econometric analysis employed descriptive statistics, unit root tests using Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) procedures, and the Autoregressive Distributed Lag (ARDL) modelling technique, complemented with bounds testing, error correction modelling, Granger causality tests, and post-estimation diagnostic tests. Empirical findings from the long-run estimates revealed that multilateral and bilateral debt servicing exert a significant positive effect on economic growth, while commercial debt servicing shows a weaker and less consistent influence. The error correction term is negative and statistically significant, confirming a rapid adjustment to long-run equilibrium following short-run shocks. The study concludes that while debt servicing can support economic growth in Nigeria, when efficiently managed. The study recommends prudent debt management, diversification of revenue sources, and strengthened macroeconomic stabilization policies to ensure long-term economic growth.