ABSTRACT

Balance of payments is a macro variable and a statistical statement that systematically summarizes for a specific period, the economic transactions of the economy with the rest of the world. The role balance of payments position play in the economy of a nation cannot be over emphasized and Nigeria is no exception. This study was carried out to examine the impact of external debt on balance of payments in Nigeria for the period 1981-2020. The data used for this study was obtained from Central Bank of Nigeria (CBN) Statistical Bulletin 2021(various issues) World Development Indicator (WDI). The objectives were to examine the impact of external debt on balance of payments in Nigeria, to investigate the extent in which exchange rate affect balance of payments in Nigeria, to determine how export affects balance of payments in Nigeria and to assess the effects of import on Nigeria's balance of payments.

The study employed the ARDL-Error Correction Model (ECM) Techniques. The empirical findings from The ARDL-Error Correction Model (ECM) results showed that it was discovered that there is a negative and significant relationship between EXTD and BOP in Nigeria. Also, there exists a positive and significant relationship between EXRT and BOP in Nigeria. There exists a positive and significant relationship between EXPT and BOP in Nigeria. Finally, a negative and significant relationship exist between IMPT and BOP in Nigeria. The issue of whether external debt contraction leads to balance of payment improvement has to be stressed in the process of policy formulation. It is on this basis that the study examined the empirical relationship between external debt and balance of payment in Nigeria. Based on the findings, the study recommends; Projects financed through government external borrowing should be thoroughly evaluated in the face of rising exchange rate before funds are committed. The credibility of the financial system should be enhanced by policies aimed at stabilizing the exchange rate. Furthermore, the government should guarantee that borrowings are made on conditions that are consistent with debt sustainability, and that borrowed money are invested productively in high-value-added areas of the economy to generate long-term growth. Local resource content should be further stimulated to reduce the heavy reliance on imports and provides products for exportation. This would improve the BOP position of the economy.