External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa

The deficiency of saving in Sub-Saharan Africa, as represented by Nigeria and South Africa has led to shortages in funding capital formation, thereby necessitating external borrowing. This has slowed down and restrained economic growth and development. The questions of external debts determinants, e...

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Main Author:	Abdullahi, Muhammad Mustapha
Format:	Thesis
Language:	eng eng
Published:	2016
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/6040/1/s94971_01.pdf https://etd.uum.edu.my/6040/2/s94971_02.pdf
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id	my-uum-etd.6040
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Abu Bakar, Nor Aznin Hassan, Sallahuddin
topic	HG Finance
spellingShingle	HG Finance Abdullahi, Muhammad Mustapha External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa
description	The deficiency of saving in Sub-Saharan Africa, as represented by Nigeria and South Africa has led to shortages in funding capital formation, thereby necessitating external borrowing. This has slowed down and restrained economic growth and development. The questions of external debts determinants, effects and causal relationships with capital formation are yet to be adequately responded to; mainly due to weak and nonrigorous methods employed in the previous studies. The focus has not been effective and specific. The objective of this study is fourfold; determine factors affecting external debt accumulation, examine effects of external debt on capital formation, assess impact of debt overhang and crowding out effects on capital formation and investigate causal relationships between external debt and capital formation in Nigeria and South Africa. Autoregressive distributive lag (ARDL) and Vector Autoregressive (VAR) modeling on time series data covering three decades were employed in the study. The results have established that, interest rate and external debt service are the most statistically significant variables explaining external debt accumulation scourge in the selected countries. Additionally, the study has discovered that, external debt has significant negative effects on capital formation in the same manner with debt overhang and crowding out effects. However, these impacts are proven to be more pronounced on capital formation in Nigeria than in South Africa. It is also established that external debt and capital formation Granger causes each other. The overall implication of the research findings is that speed of capital formation has been retarded by the negative effects of external debts. Measures by the government should be tailored towards improving capital formation by designing policies that will reduce the burden of debt accumulation and reducing the cost of external debt services. This can be done through enhancing the debt management process and improving efficiency in funds utilization, so as to ensure timely repayment and servicing of debts.
format	Thesis
qualification_name	Ph.D.
qualification_level	Doctorate
author	Abdullahi, Muhammad Mustapha
author_facet	Abdullahi, Muhammad Mustapha
author_sort	Abdullahi, Muhammad Mustapha
title	External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa
title_short	External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa
title_full	External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa
title_fullStr	External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa
title_full_unstemmed	External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa
title_sort	external debt, debt overhang, crowding out effects and capital formation in nigeria and south africa
granting_institution	Universiti Utara Malaysia
granting_department	School of Economics, Finance & Banking
publishDate	2016
url	https://etd.uum.edu.my/6040/1/s94971_01.pdf https://etd.uum.edu.my/6040/2/s94971_02.pdf
_version_	1747828013041451008
spelling	my-uum-etd.60402021-04-05T01:36:10Z External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa 2016 Abdullahi, Muhammad Mustapha Abu Bakar, Nor Aznin Hassan, Sallahuddin School of Economics, Finance & Banking School of Economics Finance and Banking HG Finance The deficiency of saving in Sub-Saharan Africa, as represented by Nigeria and South Africa has led to shortages in funding capital formation, thereby necessitating external borrowing. This has slowed down and restrained economic growth and development. The questions of external debts determinants, effects and causal relationships with capital formation are yet to be adequately responded to; mainly due to weak and nonrigorous methods employed in the previous studies. The focus has not been effective and specific. The objective of this study is fourfold; determine factors affecting external debt accumulation, examine effects of external debt on capital formation, assess impact of debt overhang and crowding out effects on capital formation and investigate causal relationships between external debt and capital formation in Nigeria and South Africa. Autoregressive distributive lag (ARDL) and Vector Autoregressive (VAR) modeling on time series data covering three decades were employed in the study. The results have established that, interest rate and external debt service are the most statistically significant variables explaining external debt accumulation scourge in the selected countries. Additionally, the study has discovered that, external debt has significant negative effects on capital formation in the same manner with debt overhang and crowding out effects. However, these impacts are proven to be more pronounced on capital formation in Nigeria than in South Africa. It is also established that external debt and capital formation Granger causes each other. The overall implication of the research findings is that speed of capital formation has been retarded by the negative effects of external debts. Measures by the government should be tailored towards improving capital formation by designing policies that will reduce the burden of debt accumulation and reducing the cost of external debt services. This can be done through enhancing the debt management process and improving efficiency in funds utilization, so as to ensure timely repayment and servicing of debts. 2016 Thesis https://etd.uum.edu.my/6040/ https://etd.uum.edu.my/6040/1/s94971_01.pdf text eng public https://etd.uum.edu.my/6040/2/s94971_02.pdf text eng public Ph.D. doctoral Universiti Utara Malaysia Abu Bakar, N. A., & Hassan, S. (2008). Empirical evaluation on external debt of Malaysia. International Business & Economics Research Journal, 7(2), 95-108. Abuzaid, L. E. M. (2011). 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External debt, debt overhang, crowding out effects and capital formation in Nigeria and South Africa

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