External Debt Pass-through to Inflation in Nigeria

Authors

Emmanuel A. Asue, Department of Economics, Benue State University, MakurdiFollow
James V. Ikyaator

Keywords

External debt, external debt service, exchange rate, inflation.

Abstract

This study examines external debt pass-through to inflation in Nigeria using annual data from 1981 to 2020 based on structural vector autoregressive (SVAR) model. The results reveal that an increase in external debt service leads to a significant depreciation of the exchange rate, which leads to a contemporaneous increase in inflation, while the direct response of inflation to external debt is statistically not significant. The impulse response confirms these results. The forecast error variance decomposition depicts that future values of official exchange rate depend on external debt, inflation and external debt service. The study recommends that the Nigerian government should curtail its acquisition of external loans as much as possible and widen the tax net to ensure that all taxable citizens obey their tax obligations.

Issue

2

Volume

14

First Page

103

Last Page

131

Recommended Citation

Asue, Emmanuel A. and Ikyaator, James V. (2023) "External Debt Pass-through to Inflation in Nigeria," CBN Journal of Applied Statistics (JAS): Vol. 14: No. 2, Article 5.
Available at: https://dc.cbn.gov.ng/jas/vol14/iss2/5