External Debt Service and the Impact on Capital Expenditure Financing in Nigeria

: This study investigates the impact of external debt servicing on capital expenditure in Nigeria over the period spanning 1981 to 2024. The study utilised the ARDL framework for analysis, with findings showing that external debt servicing impacts negatively and significantly on capital expenditure in the short-run. It is also revealed that in both the short-run and the long-run, the inflation rate impacts positively and significantly on capital expenditure, while the impact of reserves is positive and significant only after a one-period lag. The study’s outcome implies that servicing external debt in Nigeria drains the resources that should be channelled into infrastructural facilities necessary to stimulate economic growth. Consequently, it is recommended that fiscal authorities should prioritise an improvement in the budget for capital expenditure, while observing fiscal responsibility. It is also recommended that there is a need to reduce the external component of the debt so that exchange rate shocks do not affect future debt repayment.