This study focused on the effect of external debt on economic growth in Nigeria. It sought to assess the significance of external debt, and to suggest measures that could enhance its effectiveness and economic growth in Nigeria. To achieve the objective of the research, some macroeconomic indicators in the Nigerian economy, using an ex-post facto research design were applied. The data were collected, analyzed and tested using the Ordinary Least Square (OLS) multiple. From the analysis, it was revealed that there is an insignificant relationship between external debt stock and gross domestic product in Nigeria. Furthermore, external debt service cost has a significant impact on gross domestic product in Nigeria. Based on the findings, the study recommended that external debt finance should be channeled to only projects with the highest priority. In doing so, defining the purpose, duration, moratorium requirements and commitments, negotiation fees, etc, including the conditions under which the government can approve and guarantee external loans. Also, one superior method of negotiation should be maintained by the government for varying amortization and fixed interest payment. Also, multi-year rescheduling should be adopted, rather than the year-by-year approach.