Effect of External Debts and Foreign Exchange Reserve on Inflation in Nigeria

Authors: ANYANWU Francis Frank Ndubuisi

Affiliation: Institute of Capital Market Studies Nasarawa State University Keffi, Nigeria

Corresponding Author: [email protected]

May 19, 2026

SIAR-Global Journal of Economics, Finance & Accounting

Zenodo DOI: 10.5281/zenodo.20290506

Crossref DOI: 10.66694/siar.gjefa20262001

Effect of External Debts and Foreign Exchange Reserve on Inflation in Nigeria
Research Article Management

Abstract

The study examines the effect of external debts and foreign exchange reserve on inflation rate in Nigeria from 2008 to 2024. Using the Ex post facto research design, quarterly time series data were extracted from the Central Bank of Nigeria's statistical bulletin 2024. ARDL test was also used based on the unit root test result. The result showed that external debts had a negative significant effect on inflation rate in Nigeria, while foreign exchange reserve had a positive significant effect on inflation rate in Nigeria. The study recommends that government should adopt more cautious external borrowing strategies, focusing on concessional loans or those that finance productive investment rather than recurrent expenditure. This will help reduce the inflationary pressures associated with debt accumulation. While building foreign exchange reserves is important, authorities should ensure that reserve accumulation does not translate into excessive liquidity in the domestic economy. Sterilization mechanisms or coordinated monetary interventions may be necessary to mitigate short-run inflationary spillovers. 

Keywords

External Debts, Foreign Exchange Reserve, Inflation Rate, Nigeria

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How to Cite

ANYANWU Francis Frank Ndubuisi (2026). Effect of External Debts and Foreign Exchange Reserve on Inflation in Nigeria. SIAR-Global Journal of Economics, Finance & Accounting, Vol. 2, No. 2. DOI: 10.5281/zenodo.20290506

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Article Information

  • Type: Research Article
  • Journal: SIAR-Global Journal of Economics, Finance & Accounting
  • Subject Area: Management
  • Published: May 19, 2026
  • Volume: 2
  • Issue: 2
  • Word Count: Not specified
  • DOI: 10.5281/zenodo.20290506
  • Processing Fee: $50.00 USD

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