Responsiveness of Industrial Growth to External Debt Question in Nigeria

Abstract

A high level of industrial growth is associated with higher economicgrowth and development. Still the argument remains whether this mechanismis
sustainable in Nigeria, given the low level of access to external capital flows andlowdomestic capital investment. The study, therefore, employed AutoregressiveDistributed Lag Model (ARDL), variance decompositions, and impulse responsefunctions to examine the long-run ef ect of external debt on industrial growthinNigeria. The study used time series data from 1985 to 2019, and the findings reveal
that external debt has a negative and significant ef ect on industrial growth inthelong run. The evidence from the sensitivity analysis also indicated a negativeresponse of industrial growth to external debt. Consequently, policymakers in Nigeriamust ensure ef ective management of external borrowing through evidence-basedpolicies on external debt and domestic capital formation that can create enablingbusiness environment and stimulate investors’ confidence to accelerate real industrial
growth in Nigeria.