-
The Effect Of External Devt On The Nigeria Economic Growth (1989-2010)
CHAPTER ONE -- [Total Page(s) 3]
Page 2 of 3
-
-
-
Debt servicing is the payment of liquidation of the principal and
accumulated interest. It is a contractually fixed exchange on domestic
real income and savings as the debt grows or as interest rate raise.
Debt service payment must be made with foreign exchange. In other words,
debt service obligation can be met only through export earnings.
However,
should the composition of import change or should the composition of
export change or should interest rate rise causing ballooning of debt
service payment or should export earnings diminish, debt servicing
difficulties are likely to arise. This has been the experience of most
of the heavily indebted third World nations.
In order to solve the
problem, several external debt-financing options were adopted under the
Structural Adjustment Programme (SAP) in 1986. Since the introduction of
this programme, Nigerians have been plunged into one hardship after
another ranging from the devaluation of the naira through Second Tie
Foreign Exchange Market (SFEM) now Foreign Exchange Market (FEM) to the
rising prices of commodities, inflation etc. SAP as an economic
restructuring program is capable of alleviating the country’s debt trap,
a miracle Nigerian’s are waiting to see.
Specifically, as part of
the programmatic approach to reduce the burden of external debt, embargo
on new loans, limit on debt service payment, debt restricting and debt
conversion have been adopted in recent years.
1.2 STATEMENT OF THE PROBLEM
The
aim of any well-co-ordinated and articulated economic policy is to
achieve a sustained economic growth and development. However, a proper
understanding of what development is will enable a policy maker to
formulate appropriate policies for the acceleration of economic growth.
In other words, the nature of the development policy of a country will
depend on how policy makers of the country perceive growth.
The
insistence of the need of external assistance obscures the necessity for
the people of poor countries themselves to develop the facilities,
attitudes and institutions which are required if these societies are to
achieve sustained substantial material process. Indeed, these
insistences are external aids to help perpetuate the ideas and attitude
widespread in these countries which are changing the economic progress.
The
rapid growing foreign debt, its consequent payment problem and lack of
appropriate debt management has plummeted the country into a turbulent
economic crisis, balance of payment problem, foreign exchange sequence
scarcity of essential items ( including raw materials and spare parts)
which led to the closure of many factories, retrenchment of workers,
high rate of unemployment and underemployment. Embarking on productive
ventures for instance led to waste of resources and of course, poor
economic performance.
CHAPTER ONE -- [Total Page(s) 3]
Page 2 of 3
-
