Global Journal of Human Social Science, E: Economics, Volume 22 Issue 7

variables influencing external debt which are not captured in the model. EDT is a measure of public debt servicing in billion naira, FSD is captured by the overall surplus/deficit in billion naira, ISG is the difference between gross capital formation and saving; measured in billion naira, CAD is the difference between imports and exports; measured in billion naira. EXR is the rate at which a unit of the local currency exchanges for the dollar. EXR is measured as the local currency units per dollar. INT is the rates of return on investment set by the monetary authority. INT is measured as the difference between the lending rate and deposit rate. To achieve the stated objectives, annual time- series data from the period 1981 to 2020 was sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin (2021). The study expects apriori that the wider the fiscal deficit, private financing gap and trade gap, the higher the external debt burden based on the dual- gap theory. FSD, ISG, CAD and EXR are expected to be positively related to external debt while INT is expected to be negatively related to external debt.This is because the greater the value of foreign currency relative to the local currency, the more the liability of external debt and the poorer the capacity for debt repayment. On the other hand, the lower the interest rate, the greater the desire to accumulate more external debt. IV. R esults and D iscussion The study started with descriptive statistics to know the characteristics of the variables. Table 4.1 presents the summary statistics for external debt (EDT - dependent variable) and the independent variables – current account deficit/balance (CAD), fiscal deficit/ balance (FSD), exchange rate (EXR), real interest rate (INT), and investment-savings gap (ISG). The standard deviations of CAD, EDT, FSD, EXR, INT, and IS are greater than 1. This means that the level of variance in the data for current account deficit, external debt, fiscal deficit, exchange rate, investment- savings gap, and real interest rate are high. The high variance indicates that the means of current account deficit, external debt, fiscal deficit, exchange rate, investment-savings gap, and real interest rate are not reliable representatives of their individual observations. From 1981 to 2019, the minimum and maximum values for current account deficit, external debt, fiscal deficit, exchange rate, investment-savings gap, and real interest rate were - 7.22 and 21.97 percent of GDP, 1.26 and 59.82 percent of GDP, 0.61 and 306.92 naira per dollar, -5.99 and 0.85 percent of GDP, -65.86 and 18.18 percent, and -22.04 and 7.35 percent of GDP respectively. Table 4.1: Descriptive Statistics Variables CAD EDT EXR FSD INT IS Mean 2.87 20.52 100.02 -2.34 0.35 -4.31 Median 2.12 12.10 100.80 -2.06 4.31 -2.85 Maximum 21.97 59.82 306.92 0.85 18.18 7.35 Minimum -7.22 1.26 0.61 -5.99 -65.86 -22.04 Std. Dev 6.04 20.24 89.52 1.62 14.62 5.74 Skewness 1.03 0.67 0.76 -0.26 -2.63 -1.07 Kurtosis 4.27 1.96 3.02 2.49 12.23 4.52 Jarque- Bera Probability 9.49 0.0087 4.69 0.96 3.71 0.16 0.87 0.65 183.66 0.00 11.20 0.0037 Sum 111.79 800.27 3900.76 -91.23 13.52 -168.07 Sum Sq. Dev 1388.53 15571.92 304542.6 99.25 8122.43 1252.16 Source: Author’s Computation (2022) Table 4.2 shows the results of correlation, which captured objective one. The correlation coefficients of external debt (EDT) with fiscal deficit/balance (FSD), current account deficit/balance (CAD), exchange rate (EXR), real interest rate (INT), and investment-savings gap (ISG) are negative. This implies that an inverse relationship exists between external debt and the independent variables - Nigeria’s fiscal balance, current account balance, naira to dollar rate, real interest rate, and investment-savings gap. The correlation coefficients further show the strengthof the relationship. Fiscal deficit and exchange rate are moderately related to external debt, while current account deficit, real interest rate and investment-saving gap are weakly related to external debt. © 2022 Global Journals Volume XXII Issue VII Version I 39 ( ) Global Journal of Human Social Science - Year 2022 E Implication of Fiscal Deficit Financing on External Debt Sustainability in Nigeria