EFFECT OF EXTERNAL DEBT ACCUMULATION ON POVERTY RATE IN NIGERIA

Abstract

External debt accumulation has become a major macroeconomic challenge that significantly influences the poverty rate in developing economies, particularly Nigeria, where rising debt obligations have constrained public investment and weakened poverty reduction efforts. The study examined the effect of external debt accumulation on the poverty rate in Nigeria for the period 1990- 2025. Annual time series data were sourced from the Central Bank of Nigeria Annual Statistical Bulletin various editions and the World Bank (World Development Indicators (WDI). The econometric techniques of the Autoregressive Distributed Lag (ARDL) model, Augmented Dickey-Fuller (ADF) Unit Root test, and ARDL Bound approach to Cointegration test were used in the empirical analysis. The co-integration test shows that a long-run equilibrium relationship exists among the variables. The findings from both the long-run and short-run results show that external debt has a significant positive impact on the poverty rate in Nigeria. The study therefore recommends that borrowed funds should be channelled exclusively into catalytic sectors, prioritising projects with direct socio-economic returns, such as rural infrastructure (feeder roads), agricultural value chains and affordable healthcare.