The study investigated the impacted of external debt and capital formation on economic growth in Nigeria (1980-2025). The Autoregressive Distributed Lag (ARDL) modelling approach was used because ARDL is an appropriate modelling approach for variables that are integrated of mixed orders, I(0) and I(1). The Augmented Dickey-Fuller (ADF) unit root test and the ARDL Bounds test for cointegration were performed as preliminary analyses. The ARDL Bounds test confirms the existence of a long run relationship between the variables since the value of F-statistic (8.543949) is above both the lower and upper bounds at all the levels of significance (1%, 2.5%, 5% and 10%). The short-run error correction model suggested that the error correction term is negative and statistically significant (-0.318810, p < 0.01) which means that about 31.9% of short-run disequilibrium is corrected toward LR equilibrium per year. The results also indicated that the external debt had a negative effect on economic growth while the capital formation had a positive effect on the long-run economic growth. While inflation had both positive and negative short-run effects, the short-run effects of exchange rate and government expenditure were not statistically significant. The post-estimation diagnostic tests showed the absence of any serial correlation, heteroscedasticity and normal distribution of the residuals, thus the estimated ARDL model was robust and reliable. The study comes to the conclusion that while external borrowing is still a vital source of development financing, its impact is limited if it is not being used in a productive way or the debt management is unsustainable, whereas the quest to build more capital is still a key ingredient to a sustained economic growth in Nigeria. The study suggests that the government should implement prudent debt management of its external debt by investing the borrowed money in productive sectors with high return to the economy and improving its debt sustainability assessment.