EXTERNAL DEBT OR FOREIGN DIRECT INVESTMENT: WHICH HAS GREATER SIGNIFICANT ECONOMIC IMPACT ON NIGERIA?

Abstract

This study assesses the significant economic impact of external debt and foreign direct investment on the growth of Nigeria for a period stretching from 1990 to 2013. The model specifies gross domestic product (economic growth) as dependent on outstanding value of external debt and foreign direct investment inflows. Estimating the model using the error correction modelling approach, the findings show that external debt is negatively but insignificantly related to economic growth while foreign direct investment is also negatively but significantly related. Foreign direct investment is indicated to be significant for economic growth; therefore, inflows through foreign direct investment tend to have more impact on the Nigerian economy than inflows from external debt.