The Roles of Digital Technology, External Debt, and Trade Openness in Economic Growth in Sub-Saharan Africa: A Case Study of Nigeria (2000–2025)

Abstract

Amos Sunday Iluromi*

This study investigates the dynamic impact of digital technology, external debt, and trade openness on Nigeria’s economic growth trajectory over the twenty-five-year period spanning 2000 to 2025. Leveraging the Endogenous Growth Theory and the Debt Overhang Hypothesis as theoretical anchors, the research seeks to understand how the transition toward a knowledge-based economy interacts with persistent fiscal constraints. The study employs the Autoregressive Distributed Lag (ARDL) Bound Testing approach to analyse time-series data sourced from the World Bank and the Central Bank of Nigeria, allowing for the simultaneous estimation of short-run dynamics and long-run equilibrium.

The empirical results reveal a significant long-run relationship among the variables. Notably, Digital Technology (proxied by ICT contribution to GDP) emerged as the most robust driver of economic expansion, with a long-run elasticity of 0.52, suggesting that a 1% increase in digital penetration yields a 0.52% increase in Real GDP. Conversely, the findings provide strong evidence of a Debt Overhang effect; External Debt was found to have a statistically significant negative impact on growth (-0.21), particularly in the latter decade, as rising debt-servicing obligations "crowded out" productive investments. Trade Openness exhibited a positive but marginal effect (0.08), reflecting Nigeria’s structural vulnerability and limited export sophistication.

The Error Correction Term (ECT) of -0.45 indicates a moderate speed of adjustment, where 45% of annual shocks are corrected within the following year. The study concludes that while digital transformation offers a resilient pathway for non-oil growth, the escalating external debt profile serves as a critical bottleneck. It recommends a policy shift toward Digital Capital Expenditure and aggressive debt restructuring to ensure that technological gains are not neutralized by fiscal insolvency.

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