Abstract:
The study sought to examine the impact of external debt stock on investment and economic growth in ECOWAS Countries. The specific objectives of the study were to: (i) determine the effect of external debt stock on public investment in ECOWAS countries, (ii) examine the effect of external debt stock on economic growth in ECOWAS countries, (iii) evaluate the effect of external debt service on public investment in ECOWAS countries,(iv) assess the effect of external debt service on economic growth in ECOWAS countries,(v) appraise the effect of multilateral debt stock on public investment in ECOWAS countries, (vi) ascertain the effect of bilateral debt stock on economic growth in ECOWAS countries. The study adopted the ex post facto research design and annual time series data for a thirty three year period 1982- 2015 were collected from the World Bank National Account data and Organisation for Economic Cooperation and Development (OECD) National Accounts data files. Six hypotheses were proposed and tested. The Ordinary Least Squares Regression, Hausman test, Co-integration (Philip-Peron, ADF, Pedroni Residual test) as well as Error Correction model were used to test the hypothesis. Annual public investment (PINV) measured by gross capital formation and economic growth measured by real gross domestic product (RGDP) were adopted as the dependent variable. External debt stock, external debt service, exchange rate, inflation rate, Multilateral debt stock and Bilateral debt stock were the independent variables respectively. The reviewed literature suggests wide divergence of conclusions on the impact of external debt stock on investment and economic growth. Evidence from some countries e.g. Philippines, Pakistan, and Latin America suggests, it is positive while evidence from others suggest it is negative. The study found that external debt had negative and significant impact on investment in EOWAS Countries. External debt stock had negative and significant impact. External debt service had significant impact on investment. External debt service had positive and significant impact on economic growth in ECOWAS Countries. Multilateral debt stock had significant positive impact on investment in ECOWAS Countries. Bilateral debt stock also had positive and significant impact. The study recommended that ECOWAS Countries should review her external debt policies in line with the desire to increase the productive base of the economy and enjoy a leverage advantage. If the application of the loan stock is done wisely, it will contribute to value creation. ECOWAS Countries should sustain the multilateral and bilateral creditor’s relationships and ensure that both relationships are established among nations especially by making export of goods a top priority of the governments.
