Interest rate behaviour and the Nigerian economy: an error correction mechanism approach

Abstract

Interest rate behaviour and the performance of the Nigerian economy was carried out to examine the impact of interest rate fluctuations through regulated and deregulated interest rate regimes on the economy of Nigeria. The study in addition assessed the impact of credit to the private sector as well as credit to the government on Nigeria’s economic performance. The study examined the variables from 1980-2015 with the use of econometric techniques of unit roots using the Augunented Dickey FulLer (ADF) test, the Johansen cointegration test and the Error Correction Mechanism. Findings revealed the serious impact interest rate has on economic performance, as well as credit to the private sector and the government, and all were consistent with economic theories. The study recommended policies capable of putting interest rate at consistent moderate rate to spur investment for both private and public via easy access to investable funds for sustained improved economic performance.

Keywords: Interest rate, credit, regulated, deregulated, performance