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ABSTRACT
The work looks at the impact of external debt and exchange rate on the economic growth of Nigeria for the period of 1980-2020. The work seeks to test how external debt and exchange rate impacts on economic growth in Nigeria. An empirical investigation was conducted using Gross Domestic Product growth rate, External Debt as a percentage of GDP, Government Expenditure, Exchange Rate and Capital Stock. The research employs a comprehensive analysis which includes Augmented Dickey Fuller (ADF) test, Johansen Co-integration, Error Correction model. The Augmented Dickey Fuller test was used to test for the stationarity of the variables used in the research. The Co-integration test was used to check if long-run relationship exists amongst the variables. While the ECM shows the speed of adjustment from short run to long-run equilibrium. The results shows a negative relationship exists between external debt and exchange rate on the economic growth of Nigeria for the said period. The study therefore recommends that the government should implement proactive exchange rate management policies to stabilize and control currency depreciation as a stable exchange can provide businesses with more predictability and confidence thereby encouraging both domestic and foreign investments. Also, there should be a robust debt management framework to carefully asses the cost and benefits of external borrowing and see to it that external debt is used for productive purposes that contributes to economic growth.
