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Publication Information
Published by: Admin
Published: 7 days ago
View: 22
Pages: 31
ISBN: 1
Download PDF (EN)
Abstract
This study examines the impact of sovereign debt
accumulation, particularly through Ways and Means (W&M) financing, on inflation
and bond yields in Nigeria. Using monthly data from 2010 to 2024, the analysis
employs the slope heterogeneity and cross-sectional dependence, complemented by
the Synthetic Control Method (SCM) to construct a counterfactual trajectory for
inflation and yields absent extensive W&M financing. Findings reveal that
sustained W&M financing significantly elevates sovereign bond yields,
signalling increased risk premiums and weakened market confidence, while
inflationary effects are more nuanced and mediated by macroeconomic conditions.
The results highlight the long-term macroeconomic costs of persistent debt
monetisation. The study recommends phasing out excessive W&M reliance
through legally binding fiscal rules to restore debt sustainability and
monetary policy credibility.
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