Domestic Debt and Price Stability in Nigeria.

Abstract:

The impact of domestic debt on price stability in Nigeria from 2008 to 2023 is being analyzed in the research. The study employed an ex post-facto research design. Data from the Central Bank of Nigeria's statistical bulletin 2023 and Debt Management Office reports 2023 were used, specifically quarterly time series data. The dependent variable of price stability is inflation rate, while the independent variable were banking sector debt and non-banking sector debt. The Johansen cointegration test estimation was used based on the unit root test result with shows that domestic debt had no cointegration with inflation rate in Nigeria. Based on regression analysis, it was found that the banking sector debt had a positive significant effect on inflation rate in Nigeria. While, non-banking sector debt had a negative significant effect on inflation rate in Nigeria. Therefore, the study recommended that banking sector debt should be properly channeled to productive financing of working capital to agricultural sector of seedlings and fertilizers that will enhance price stability by reducing food inflation. Government should give more priority to domestic debt through non-banking sector debts such as the Sukuk loans which is tied to capital projects like roads, rails, and many other infrastructural developments.