This paper ascertains the nexus between external debt burden and economic growth in Nigeria by specifically
evaluating the nexus and effect of external debt burden on gross domestic product and index of industrial. To achieve
these objectives, we employed the ordinary least square method of estimation and granger causality test in which
variations in gross domestic product and index of industrial production were regressed on external debt burden using
time series data from 1981 to 2015. Secondary data casing the time frame were collected from Central Bank of Nigeria
statistical bulletin. Our estimated output suggests that there is a long run nexus between external debt burden and
economic growth in Nigeria. Again, external debt burden has no significant effect on gross domestic product and index of
industrial production. Gross domestic product and index of industrial production have positive insignificant relationship
with external debt burden. This leys credence to the dual gap theory which expresses economic growth as a function of
investment, and for investments to be successfully executed, there must be domestics saving which is lacking in emerging
economies. Relying on our estimated results, we are of the opinion that external debt should be contracted solely for
economic reasons and not for social or political reasons as the case in Nigeria. Though external loan is not an evil, but to
enhance our industrial performance, industries oriented policies should be initiated and implemented. Fund borrowed
externally should be channelled to capital expenditures which improves the manufacturing capacity, generates
employments and reduced poverty.
Keywords: External debt management; economic growth; index of industrial production.