An Assessment of the Effect of External Debt on Sustainable Infrastructural Development in Nigeria

Abstract

Sustainable investment in infrastructure requires a huge financial outlay. Resources scarce countries borrow to bridge their resource gap in order for them to develop their infrastructure. Thus, public borrowing provides a reliable way to finance government spending where available resources are insufficient. Nigeria is an experienced borrower from multilateral, bilateral, and private lenders in a bid to fill its infrastructural gap. As of 2021, Nigeria’s external debt stood at US$39.5 billion. Despite the loans contracted over the years, there is an observed gap between her accumulated external debt and the level of infrastructural development available to the citizens. The study, therefore, investigated the effect of external debt on sustainable infrastructural development in Nigeria. The study employed a mixed-methods design. For the purpose of credibility and validity of the findings, the triangulation technique was adopted. The population of the study was 532, drawn from Public Debt Management=142, Fiscal Responsibility Commission=110, and Central Bank of Nigeria=280. The sample size of the study was 228 using the Taro Yamane sample size determination formula. The study employed structured questionnaires and interviews as its data collection instruments. The questionnaire and interview schedule were subjected to a validation process of face and content validity. A pilot study was conducted involving 10% of the respondents who were randomly selected from the Ogun and Kwara states’ ministry of finance to determine the instruments’ reliability. The Cronbach’s Alpha values 0.758 and 0.842 were obtained and which indicated a high level of internal consistency of the scales. Data analysis was carried out with the aid of Inferential statistics and content analysis. The study found that external debt had no significant effect on sustainable infrastructural development in Nigeria (β = 0.002, t ₍198) = 0.040, p > 0.05. The study concluded that external debt had no significant effect on sustainable infrastructural development in Nigeria. The paper recommended that the National Assembly and the Federal Ministry of Finance should ensure that external loans are tied to specific projects.

Keywords: External debt, Sustainable infrastructure, Gross domestic product, Productive investment.