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Domestic Debt Burden, Debt Overhang and Inflationary Pressure in Nigeria

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  • Tamunonimim Anipiriworima Ngerebo-A

Abstract

This study is an attempt at examining the impact of financing public deficits and projects, through domestic borrowing as well as the burden created by this source of financing government activities, on inflationary pressure in Nigeria. The independent variables were Total Domestic Debt Stock (TDST) [decomposed into short-term (TSTD) and long-term (TLTD)], Treasury Bills’ interest rate (TBR), and minimum rediscount rate or monetary policy rate (MRR); while the dependent variable was inflation rate. The data for this study were obtained from the annual Statistical Bulletins of Central Bank of Nigeria (CBN) for the scope of the study (1970-2010), and were analyzed by Ordinary Least Square (OLS) method using E-View and Microfits. Three hypotheses were formulated and tested. It was found that TDST had positive and significant relationship with inflation in the short-run, while the relationship was negative and significant in the long-run. Total Debt overhang has serial correlation with inflation in the short-run. It was also found that when decomposed, TSTD has positive and significant relationship with inflationary pressure in Nigeria, but the relationship is negative and significant for TLTD. The study recommended, inter alia, that TDDO should be held for long time in order to have the desired impact on inflationary pressure in Nigeria.

Suggested Citation

  • Tamunonimim Anipiriworima Ngerebo-A, 2014. "Domestic Debt Burden, Debt Overhang and Inflationary Pressure in Nigeria," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 3(3), pages 172-183.
    • Handle: RePEc:rss:jnljee:v3i3p6
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    References listed on IDEAS

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    Cited by:

    1. Akingbade U. Aimola & Nicholas M. Odhiambo, "undated". "Public Debt and Inflation: Empirical Evidence from Ghana," Working Papers AESRIWP06, African Economic and Social Research Institute (AESRI).
    2. Akingbade U. Aimola & Nicholas M. Odhiambo & Christian Nsiah, 2021. "Public debt and inflation nexus in Nigeria: An ARDL bounds test approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1921905-192, January.
    3. Aimola Akingbade U. & Odhiambo Nicholas M., 2020. "Public Debt and Inflation: A Review of International Literature," Folia Oeconomica Stetinensia, Sciendo, vol. 20(1), pages 9-24, June.
    4. Akingbade U. Aimola & Nicholas M. Odhiambo & Christian Nsiah, 2021. "Public debt and inflation nexus in Nigeria: An ARDL bounds test approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1921905-192, January.
    5. Aimola, Akingbade U & Odhiambo, Nicholas M, 2021. "Public debt and inflation: Empirical evidence from Ghana," Working Papers 27063, University of South Africa, Department of Economics.

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