EXTERNAL DEBT SUSTAINANBILITY AND POVERTY REDUCTION IN NIGERIA

Chivuzo Joe-Martins Ugwu, Ebere Agbo, George Duhu Isiwu

Abstract


This work was set to examine external debt sustainability and poverty reduction in Nigeria. Poverty rate was used as dependent variable while external debt (EXDBT), debt sustainability (DTS), which was proxied with debt to revenue ratio, exchange rate (EXR), interest rate (INT), were used as the independent variables and inequality (INE) as the control variable. Time series data spanning the period 1985 to 2022 were used. Data series were tested for stationarity with the aid of the Augmented Dickey-Fuller (ADF) statistics. The results shows a mixed order of integration. The model was estimated using Autoregressive Distributed Lag (ARDL) model and Pairwise granger Causality tests. It was found that in the short run, external debt had a positive and significant relationship with poverty,  Debt sustainability, exchange rate and inequality had a negative and insignificant relationship with poverty rate while inequality had a positive and insignificant relationship towards the reduction poverty while in the long run, external debt and interest rate were positive and statistically significant, debt sustainability, exchange rate were negative and statistically significant and inequality was negative but statistically insignificant. Also the granger causality test shows that there is no causality relationship across the variables and also external debt was not a determinant component of poverty reduction. The study recommends that government should ensure that 30-40% of external debt is targeted as a catalyst for poverty reduction in Nigeria.


Keywords


External Debt, Debt Sustainability, Poverty Reduction, ARDL, Nigeria.

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References


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