Nigerian Journal of Banking and Financial Issues (NJBFI)

THE NEXUS BETWEEN DEBT FACTORS AND ECONOMIC DEVELOPMENT IN SUB-SAHARAN AFRICAN COUNTRIES

Abstract

The study is an attempt to investigate the causal influence running from debt factors to economic development in sub-Saharan African countries. The study employed quantitative research design. A random technique was adopted to select the countries with sufficient observations that will cover the scope of this study. Panel data estimation technique was adopted because it takes care of heterogeneity associated with individual countries by allowing for individual specific variables. The dependent variable for this work is economic development and it is proxy by GDP per capita/income per head. And the independent variables are external debt, total of debt service on external debt and long-term external debt stocks. Data on these variables are collected from the World Bank Indicator for a period of 35 years which spans from 1985 to 2019. The data were de-trend by taking the log form. Mean group and pooled mean group models are employed to analyze the hypotheses of this study. The study concluded that in the long run external debt, total of debt service on external debt and long-term external debt stocks have a negative influence on economic development in sub-Saharan African countries. It is recommended that any projects that the government want to finance with external borrowing should be properly appraised, technically and financially viable before the government will embark on such project. This will enhance the proper management of the borrowed funds.