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Relating exchange rate, interest rate and credit to private investment in Nigeria

Author

Listed:
  • Ebere Ume Kalu
  • Augustine C. Arize
  • Josaphat Uchechukwu J. Onwumere
  • Elizabeth Uzoamaka Okechukwu

Abstract

The study investigated the link among interest rate, credit, exchange rate and private investment with focus on the Nigerian economy. The sets of data are drawn from the statistical bulletin of the Nigerian Central Bank for the period 1981 to 2016. The ARDL bound test approach showed that the elasticity of private investment to the studied variables thus: 32% and 46% for its own first and second lag respectively; 141% and -131% for the contemporaneous and first lag value of credit respectively; 5% for interest rate with exchange rate showing a non-significant elasticity of 0.01%. The ECM shows that private investment adjusts to the speed and dynamics of interest rate, credit and investment. It is recommended that government in collaboration with the monetary authorities should evolve an interest rate, credit creation policies and exchange rate that work to stimulate investment in particular and growth in general.

Suggested Citation

  • Ebere Ume Kalu & Augustine C. Arize & Josaphat Uchechukwu J. Onwumere & Elizabeth Uzoamaka Okechukwu, 2023. "Relating exchange rate, interest rate and credit to private investment in Nigeria," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 34(1), pages 43-57.
    • Handle: RePEc:ids:ijbglo:v:34:y:2023:i:1:p:43-57
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