The Nexus Between Sovereignty, External Debt, and Economic Development: A Case Study of Nigeria’s Borrowing from International Financial Institutions

Abstract

This study investigates the relationship between external debt and Nigeria’s economic growth from 2009 to 2023,
focusing on the impact of borrowing from international financial institutions (IFIs). The primary aim of the study is to
explore the trends in Nigeria’s external debt stock, debt service obligations, debt-to-GDP ratio, and foreign exchange
reserves, and to assess how these factors interact with the country’s economic growth. Using data from the Central Bank
of Nigeria, the Debt Management Office (DMO), the World Bank, and the International Monetary Fund (IMF), the
research identifies a substantial increase in Nigeria’s external debt, which rose from USD 60 billion in 2008 to USD 110
billion by 2023. Concurrently, debt service payments escalated from USD 5 billion to USD 13 billion, placing a growing
strain on the country’s budget. Additionally, the study highlights an increasing debt-to-GDP ratio, which reached 50% by
2023, signaling potential risks to fiscal stability. Despite the clear role of external debt in financing infrastructure and
development projects, the study also identifies concerns about its sustainability. Limitations of the study include the lack
of a more granular analysis of debt sources and a limited consideration of domestic debt trends. Future research should
focus on comparative studies with other emerging economies, an in-depth examination of Nigeria’s debt management
policies, and strategies for economic diversification to mitigate the risks associated with heavy reliance on external debt.
This research emphasizes the need for more effective debt management to ensure long-term fiscal health and economic
stability.