Interest Rate and the Nigeria Economy

Abstract

The study was carried out to investigate the relationship between Interest rate and Nigerian economic growth. The study used the period of 36 years spanning from 1986 to 2022, adopting Ordinary Least Square (OLS) technique to analyze the data. The data for the variables used were collected from Central Bank of Nigeria (CBN) Statistical Bulletin, 2023. Real Gross Domestic Product (RGDP) was used as a proxy for economic growth, while Interest rate, Inflation rate and Exchange rate were used as proxies for Interest rate.  The study found that INF has a negative (-55.623) and insignificant (0.560) relationship with GPD. This implies that an increase in INF will lead to a reduction in GDP however the reduction may not be significant enough to totally eliminate growth in GDP. INTR also has a negative (-1007.29) but significant relationship (.028) with GDP. This similarly implies that an increase in INTR would lead to a reduction in GDP. Contrary to the first two explanatory variables, EXCR has a positive (146.727) and significant (0.000) relationship with GDP. This portrays that an increase in EXCR would enhance GDP. The study recommended that there is a need to promote policies that stabilizes interest rates, CBN and other policy makers should work strappingly to stabilize inflation and interest rate in the economy.