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Impact of Interest Rate Deregulation on Investment Growth in Nigeria

Author

Listed:
  • Osuji Obinna

    (Department of Economics, Michael Okpara University of Agriculture, Umudike, Nigeria.)

Abstract

The study examined the impact of interest rate liberalization on investment in Nigeria from 1961 to 2017 using error correction model (ECM) and variance decomposition of vector autoregressive model. The empirical findings of the study showed that interest rate liberalization has no significant impact on investment in Nigeria. The result further showed that prime lending rate had a negative insignificant impact on investment in Nigeria both in the pre and post liberalization period. Private sector credit and Nominal exchange rate were also observed to be insignificant factors explaining variations in investment in Nigeria. However, national income and government expenditure exerted a positive and negative significant impact on investment respectively. The study therefore recommended that government through the Central Bank of Nigeria should use her monetary policies to influence interest rate in such a way as to stimulate investment growth in the country instead of allowing it to be freely determined by the market forces as the theory on liberalization suggests.

Suggested Citation

  • Osuji Obinna, 2020. "Impact of Interest Rate Deregulation on Investment Growth in Nigeria," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 10(2), pages 170-180.
    • Handle: RePEc:eco:journ1:2020-02-18
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    References listed on IDEAS

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    5. Akpansung, Aniekan Okon & Waziri, Shall Erinus, 2018. "Has Financial Liberalisation Promoted Economic Growth in Nigeria? Evidence from Auto-Regressive Distributed Lag (ARDL) Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(2), pages 172-188.
    6. Tajudeen, Egbetunda & Taofeek Olusola, Ayinde & AbdulGaniy Ademola, Balogun, . "Interest Rate Liberalization, Financial Development and Economic Growth in subSaharan African Economies," African Journal of Economic Review, African Journal of Economic Review, vol. 5(2).
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    Cited by:

    1. Benjamin Musiita & Frederick Nsambu Kijjambu & Asaph Kaburura Katarangi, 2024. "Factor Input Prices and Unemployment in Uganda," Journal of Economics and Behavioral Studies, AMH International, vol. 16(1), pages 52-66.
    2. Babalola Abdurrauf & Abdul Abiodun Ibrahim, 2022. "Does Interest Rate Really Stimulate Savings in Nigeria?," Folia Oeconomica Stetinensia, Paradigm, vol. 22(2), pages 18-37, December.
    3. Godwin Olasehinde-Williams & Ruth Omotosho & Festus Victor Bekun, 2024. "Interest Rate Volatility and Economic Growth in Nigeria: New Insight from the Quantile Autoregressive Distributed Lag (QARDL) Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 20172-20195, December.

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    More about this item

    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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