Abstract
This study examines the dynamic effects of external debt stocks on real economic growth in Nigeria—incorporating debt services, interest rate, inflation, and capital formation. The study utilizes annual time series from 1981 to 2017 employing the dynamic autoregressive distributed lag (ARDL) cointegration bounds test methodology. Empirical findings indicated that external debt stocks and debt services have a significant effect on real economic growth both in the short and long run. The result of the pairwise conditional Granger causality gives a short run procyclical bidirectional nexus between capital formation and economic growth. Thus, external debt stocks affect real GDP via the channels of accumulated debts, debt services, and macroeconomic variable fluctuations in the long run. Result obtained supports the objective of the Nigerian Debt Management Office in optimally managing the nation's external debt.