EFFECT OF INTEREST RATE ON ECONOMIC GROWTH IN NIGERIA
- Project Research
- 1-5 Chapters
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
-
- Background of the Study
- Background of the Study
The effect of Interest rate on economic growth in Nigeria has been a matter of controversy over a long period of time. Yet, what constitutes an appropriate interest rate policy still remains a puzzling question. Until the early 1970s, the main line of argument was that because the interest rate represents the cost of capital, low interest rates would encourage the acquisition of investment and promote economic growth, a notion consistent with the Keynesian and neo-classical analysis. This promoted many countries to impose interest rate ceilings at below market clearing levels.
Interest rate is a prominent feature of any economy. Interest rate change in response to a variety of economic events such as change in federal policy, crises in domestic and international financial market and changes in the prospects for long term economic growth and inflation. However, economic events such as these tend to be irregular (Keith, 1996).
Interest rate reform, a policy under financial sector liberalization, was to achieve efficiency in the financial sector and engendering financial deepening. In Nigeria, financial sector reforms began with the deregulation of interest rate in august 1987 (Ikhide and Alawode, 2001). Prior to this period, the financial system operated under financial regulation and interest rates were said to be repressed. According to McKinnon (1973) and Shaw (1973), financial repression arises mostly when a country imposes ceiling on deposit and lending nominal interest rates at a low level relative to inflation. The resulting low or negative interest rates discouraged saving mobilization and channelling of the mobilized savings through the financial system. This has a negative impact on the quantity and quality of investment. Therefore, the expectation of interest rate reform was that it would encourage domestic savings and make loanable funds available in the banking institutions. But the criticism has been that the “tunnel-like” structure of interest rate (Ojo, 1976) in Nigeria is capable of discouraging savings and retarding investment.
A study by Kham and Reinhart (1990) observe that there is a close connection between the level of investment and economic growth. In other words, a country with low level of investment would have a low GDP growth rate. The use of ryid exchange rate and interest rate controls in Nigeria in low direct investment, the leads to financial impressions in the early 1980. Fund were inadequate as there was a general lull in turn leads to the liberalization of the financial system Omole and Falokun (1999). This may have an adverse effect on investment and economic growth.
As already discussed so far, it is quite clear that an understanding of the nature of interest rate behavior is critical and crucial in designing policies to promote savings, investment and growth. It is pertinent to note that this research attempts to investigate and ascertain the impact of interest rate volatility on investment decisions in Nigeria using time series data covering from 1981-2010.
Related Project Materials
THE IMPACT OF TELEVISION ON THE LEARNING HABITS OF PRIMARY SCHOOL CHILDREN
ABSTRACT
Television has been an instrument of learning. Its roles cannot be underestimated for children, who are...
MANAGEMENT OF PUBLIC DUMPSITE AND ITS EFFECT ON RESIDENTS
Abstract
This research work is aim at examining the management of public dumpsite and its effect on residents. The research choose the ra...
INFLUENCE OF WELFARE FACTORS ON SITES WORKERS' PERFORMANCE
ABSTRACT
The purpose of this study was to assess the influence of welfare on the performance of building site workers at...
TOXICITIES AND SEDATIVE EFFECTS OF TOLOACHE, DATURA INNOXIA MILLER, ON THE AFRICAN CATFISH CLARIAS GARIEPINUS BURCHELL, FINGERLINGS
ABSTRACT
Studies on toxicological and sedative effects of Datura innoxia plant parts (leaf, seed, stem, pod and root) on Clarias gariepin...
AN EXAMINATION OF SLANGS USAGE AMONG UNDERGRADUATE
BACKGROUND OF THE STUDY
It is possible to describe language as a method of communication, a platform fo...
THE EFFECT OF E-LEARNING ON HIGHER EDUCATION IN NIGERIA
ABSTRACT
This study primarily focus on how effective the use of E-learning has been on higher education...
EVALUATION OF THE IMPACT OF INFORMATION AND COMMUNICATION TECHNOLOGY ON THE MANAGEMENT OF STATE TERTIARY INSTITUTIONS
Background to the Study
All over the world, education has been recognized as a critical tool for effecting national deve...
AN ASSESSMENT ON THE IMPACT OF INDUTRIALIZATION ON ECONOMIC GROWTH IN NIGERIA
BACKGROUND OF THE STUDY
Most developing nations define industrialization as a central objective of their economic policy they see; indust...
ISSUES AND CHALLENGES IN THE ADOPTION OF IFRS FOR SMES IN NIGERIA
ABSTRACT
The general objective of this research work is to investigate the likely challenges that SMEs will encounter in...
ELECTORAL LAWS AND CREDIBLE ELECTIONS IN NIGERIA: AN APPRAISAL OF 2010 ELECTORAL ACT ON 2011 AND 2015 GENERAL ELECTIONS
ABSTRACT
Towards the end of 1990, international dynamics, pressures and persuasion combined to move Nigeria towards the embrace of a poli...
