IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/117954.html

Interest Rate Pass-Through in Nigeria

Author

Listed:
  • Oyadeyi, Olajide

Abstract

This paper examined interest rate pass-through in Nigeria using monthly data from 2006 to 2020. It focused on the pass-through process from the policy rate to the money market and retail rates and from the pass-through of the money market rates to the retail rates. The results showed that there was an incomplete short-run pass-through with a higher degree from the policy rate to the money market rate, while the pass-through process over-shoot in the long run. However, this pass-through was found to be very weak and incomplete from the policy rate to the retail rates and from the money market rates to the retail rates. The mean adjustment lags suggested that it takes a quicker period for policy rate changes to fully reflect on the money market and retail segment of the market. Finally, the deposit rates were found to respond more significantly, albeit slowly, to changes in the policy and interbank rates compared to the lending rates. In essence, we recommend that the monetary authorities critically appraise the size of interest rate pass-through to the retail and money market rates in light of the heterogeneous response from the policy rate to the retail and money market rates.

Suggested Citation

  • Oyadeyi, Olajide, 2022. "Interest Rate Pass-Through in Nigeria," MPRA Paper 117954, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117954
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/117954/1/Interest%20Rate%20Pass-through%20in%20Nigeria%20-%20Olajide_Oyadeyi.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Nikoloz Gigineishvili, 2011. "Determinants of Interest Rate Pass-Through: Do Macroeconomic Conditions and Financial Market Structure Matter?," IMF Working Papers 2011/176, International Monetary Fund.
    2. Scholnick, Barry, 1996. "Asymmetric adjustment of commercial bank interest rates: evidence from Malaysia and Singapore," Journal of International Money and Finance, Elsevier, vol. 15(3), pages 485-496, June.
    3. repec:rza:wpaper:233 is not listed on IDEAS
    4. Olajide Oyadeyi & Temidayo Akinbobola, 2020. "Financial Development and Monetary Transmission Mechanism in Nigeria (1986-2017)," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 7(1), pages 74-90.
    5. repec:aer:wpaper:259 is not listed on IDEAS
    6. repec:bny:wpaper:0081 is not listed on IDEAS
    7. Michiel van Leuvensteijn & Christoffer Kok Sørensen & Jacob A. Bikker & Adrian A.R.J.M. van Rixtel, 2013. "Impact of bank competition on the interest rate pass-through in the euro area," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1359-1380, April.
    8. Belke, Ansgar & Beckmann, Joscha & Verheyen, Florian, 2013. "Interest rate pass-through in the EMU – New evidence from nonlinear cointegration techniques for fully harmonized data," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 1-24.
    9. Devereux, Michael B. & Engel, Charles, 2002. "Exchange rate pass-through, exchange rate volatility, and exchange rate disconnect," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 913-940, July.
    10. Olajide Oyadeyi & Temidayo Akinbobola, 2020. "Financial Development and Monetary Transmission Mechanism in Nigeria (1986-2017)," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 7(1), pages 74-90.
    11. Olajide Oyadeyi, 2023. "Financial development, interest rate pass-through and interest rate channel of monetary policy," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2209952-220, December.
    12. de Bondt, Gabe, 2002. "Retail bank interest rate pass-through: new evidence at the euro area level," Working Paper Series 136, European Central Bank.
    13. Mordi, Charles N. O. & Adebiyi, Michael A. & Omotosho, Babatunde S., 2019. "Modelling interest rates pass-through in Nigeria: An error correction approach with asymmetric adjustments and structural breaks," MPRA Paper 96171, University Library of Munich, Germany.
    14. von Borstel, Julia & Eickmeier, Sandra & Krippner, Leo, 2016. "The interest rate pass-through in the euro area during the sovereign debt crisis," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 386-402.
    15. Binning, Andrew & Bjørnland, Hilde C. & Maih, Junior, 2019. "Is monetary policy always effective? Incomplete interest rate pass-through in a DSGE model," Working Paper 2019/22, Norges Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olajide O. Oyadeyi, 2025. "The Velocity of Money and Lessons for Monetary Policy in Nigeria: An Application of the Quantile ARDL Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 8249-8285, June.
    2. Olajide Oyadeyi, 2024. "Monetary Integration Across West Africa: Is the Region Ripe for a Monetary Union?," SAGE Open, , vol. 14(2), pages 21582440241, April.
    3. Oyadeyi, Olajide & Akinbobola, Temidayo, 2022. "Financial Development and the Current Account in Nigeria," MPRA Paper 118001, University Library of Munich, Germany.
    4. Olajide O. Oyadeyi, 2024. "Macroeconomic Uncertainty and Sectoral Output in Nigeria," Economies, MDPI, vol. 12(11), pages 1-41, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aurélien Leroy & Yannick Lucotte, 2016. "Structural and Cyclical Determinants of Bank Interest-Rate Pass-Through in the Eurozone," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 58(2), pages 196-225, June.
    2. Egorov, Aleksei V. (Егоров, Алексей В.) & Borzykh, Olga A. (Борзых, Ольга А.), 2018. "Asymmetric Interest Rate Pass-Through in Russia [Асимметрия Процентного Канала Денежной Трансмиссии В России]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 92-121, February.
    3. Noura Abu Asab & Juan Carlos Cuestas, 2015. "Towards Adopting Inflation Targeting in Emerging Markets: The (A)symmetric Transmission Mechanism in Jordan," Working Papers 2015013, The University of Sheffield, Department of Economics.
    4. Gerlach, Jeffrey R. & Mora, Nada & Uysal, Pinar, 2018. "Bank funding costs in a rising interest rate environment," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 164-186.
    5. Jiří Gregor & Aleš Melecký & Martin Melecký, 2021. "Interest Rate Pass‐Through: A Meta‐Analysis Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 141-191, February.
    6. Bennouna, Hicham, 2019. "Interest rate pass-through in Morocco: Evidence from bank-level survey data," Economic Modelling, Elsevier, vol. 80(C), pages 142-157.
    7. Olajide Oyadeyi, 2023. "Financial development, real sector, and economic growth in Nigeria," SN Business & Economics, Springer, vol. 3(8), pages 1-21, August.
    8. Domonkos, Tomas & Fisera, Boris & Siranova, Maria, 2023. "Income inequality as long-term conditioning factor of monetary transmission to bank rates," Economic Modelling, Elsevier, vol. 128(C).
    9. Panagiotis Lazaris & Anastasios Petropoulos & Vasileios Siakoulis & Evangelos Stavroulakis & Nikolaos Vlachogiannakis, 2021. "Interest rate pass through in the deposit and loan products provided by Greek banks," Working Papers 287, Bank of Greece.
    10. Belke, Ansgar & Beckmann, Joscha & Verheyen, Florian, 2013. "Interest rate pass-through in the EMU – New evidence from nonlinear cointegration techniques for fully harmonized data," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 1-24.
    11. Ansgar Belke & Joscha Beckmann & Florian Verheyen, 2012. "Interest Rate Pass-Through in the EMU – New Evidence from Nonlinear Cointegration Techniques for Fully Harmonized Data," Ruhr Economic Papers 0350, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    12. Kotz Hans-Helmut & Semmler Willi & Tahri Ibrahim, 2018. "Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(5), pages 1-19, December.
    13. Nora Abu Asab & Juan Carlos Cuestas, 2021. "Towards adopting inflation targeting: The credibility and limitations of monetary policy under the fixed exchange system—the case of Jordan," The World Economy, Wiley Blackwell, vol. 44(1), pages 262-285, January.
    14. Olajide O. Oyadeyi, 2025. "The Velocity of Money and Lessons for Monetary Policy in Nigeria: An Application of the Quantile ARDL Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 8249-8285, June.
    15. Michaelis, Henrike, 2024. "Changes in the euro area interest rate pass-through," Discussion Papers 21/2024, Deutsche Bundesbank.
    16. S. Burcu Avci & Eray Yucel, 2017. "Effectiveness of monetary policy: evidence from Turkey," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 7(2), pages 179-213, August.
    17. Jiri Gregor & Jan Janku & Martin Melecky, 2022. "From Central Counter to Local Living: Pass-Through of Monetary Policy to Mortgage Lending Rates in Districts," Working Papers 2022/9, Czech National Bank, Research and Statistics Department.
    18. Olajide Oyadeyi, 2024. "Monetary Integration Across West Africa: Is the Region Ripe for a Monetary Union?," SAGE Open, , vol. 14(2), pages 21582440241, April.
    19. Vajanne, Laura, 2009. "Inferring market power from retail deposit interest rates in the euro area," Research Discussion Papers 27/2009, Bank of Finland.
    20. Olajide O. Oyadeyi & Sodiq Arogundade & Mduduzi Biyase, 2024. "Correction: How did African stock markets react to the Russia-Ukraine crisis “black-swan” event? Empirical insights from event study," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-1, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:117954. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.