External Debt And Poverty Incidence In Nigeria: Error Correction Mechanism

This study examines external debt stock impact on poverty incidence in Nigeria. The study's data spanning from 1981 to 2018 were collected from the Central Bank of Nigeria Statistical Bulletin and World Bank: World Development Indicators. The variables for the study are external debt stock, debt service payments, poverty, foreign reserve, exchange rate, investment, and economic growth. The data was analysed using the Error Correction Mechanism. ADF and PP were applied to test for the stationarity while the long-run relationship was examined through the ARDL Bound Test. The results showed that the variables are integrated of order one. External debt stock has a significant positive impact on poverty, debt service payments and poverty incidence in Nigeria. The study therefore submitted that large stock of foreign debt and debt service payments are not desirable for the growth of Nigeria's economy. Therefore, the study acclaims that government needs to reduce the accumulation of debts and its burden. Debt Management Office should reduce the national poverty threshold from the minimum level of 25% of GDP to something lower. This will caution the government from securing loans which throws the nation into debt servitude and impoverishes its citizens.