Impact of external debt on sectoral performance: Comparative study of Nigeria and Botswana

Abstract

Impacts of public debt remains unclear in Africa due to some heterogeneous macroeconomic fundamentals. Hence, this study focuses on a highly indebted nation, Nigeria, and Botswana, with a relatively low debt profile. The study utilizes the dual gap theoretical framework and deploys the Autoregressive Distributed Lag (ARDL) model to study external debt, and its influence on sectoral performance in Nigeria and Botswana between 1981 and 2019. The study focuses on the following three sectors; service, agriculture and industry with data from World Development Indicators (WDI). Findings reveal that only agricultural sector is influenced positively by external debt in Botswana, while external debt in the long run has a significantly detrimental impact in the Nigerian agricultural sector. We therefore, recommend both governments to be prompt in monitoring of loans, right from when it is acquired to how it is being spent.