Impact of Interest Rate on Gross Domestic Investment in Nigeria

Abstract

This study investigated the impact of interest rate on gross domestic investment in Nigeria, using data for the period of 1981-2018, Ordinary Least Squared (OLS) method of data analysis was adopted because of its Best Linear Unbiased Estimators (BLUE) properties. The data for the variables used was sourced from Central Bank of Nigeria (CBN) Statistical Bulletin. The variables used were credit to private sector, money supply, Government Expenditure prime lending rate and monetary policy rate. The study adopted the unit root test, co-integration approach, as well as Error Correction Mechanism. E- View software was used for the analysis. The study found government expenditure, credit to private sector, money supply is positive and significantly significant. The study recommends that there is need for further management of interest rate in Nigeria, because the more interest rate management, the more the level of investment opportunities in Nigeria. Credit to private sector should be made accessible to the target population; in so far the loan should be channeled to investment purposes.