External Debt, Inflation and the Public sector in Nigeria: A Structural Analysis

Momodu Ayodele A and Monogbe Tunde G.


The rationale behind this study is to ascertain the behavior of inflation to rise in government debt and how this affect the public sector in Nigeria between the periods 1981 to 2016. In actualizing the crux objective of the study, a disaggregate analysis was introduced where multilateral loan and bilateral loan which constitute the Nigeria external debt was considered separately. In the short run, findings shows that multilateral loan has significantly contributed to the public sector advancement while bilateral loan exhibit a negative contribution to economic advancement in Nigeria. The impulse response report, which is our major focus, clarifies the behavior of each of the explanatory variables to the own shock and to the economy at large. More credence was given to multilateral debt as it behave positively to the public sector in Nigeria in the long period, thereby suggesting that multilateral loan could be use in forecasting improvement in the public sector in Nigeria. This study hereby recommended that all forms of leakages must be blocked and the managers of the Nigeria fund must hedge against pleased effect which has been the order of the day in our political platform and in the country at large if the economy must experience the benefit of foreign borrowing.