External financing has become a veritable resort to remedying the common problems of low productivity, low productivity, low savings and high dependent on consumption from exports in most less developed economies. The use of external finance is believed to have the capacity to close wide gap between domestic savings and investment and provide the complementary funds to facilitate economic activities necessary for growth in Nigeria. This study aimed to investigate the effect of external financing on economic growth in Nigeria between 1986 and 2017. External financing was captured using five variables of external debt stock (EDS), foreign direct investment (FDI), official development assistance (ODA), remittance (RMT) and foreign portfolio investment (FPI), as the independent variables, regressed on economic growth represented by annual growth rate of gross domestic product (GDPR) as the dependent variable. Data for these variables were obtained from World Development Indicator, and analyzed based on the Autoregressive Distributive Lag (ARDL) approach. The findings revealed that, in the long run, EDS and FDI had a negative and a positive, significant effects, respectively, while others had no effect on growth; in the short run, all the external financing variables (EDS, FDI, FPI, ODA, and RMT) had no significant effect on economic growth in Nigeria. The study averred that FDI is a veritable source of financing that can bring about economic sustainability to Nigeria. The study recommended, among others, that government should deploy external debts for regenerative projects that will eventually liquidate themselves in the long run.
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