THE IMPACT OF INTEREST RATE LIBERALIZATION ON INVESTMENT IN NIGERIA
Sold By: Joe Project Store | Item Type: Project Material | Report this? | Attributes: 65 pages | 1-5 chapters | Amount: ₦5,000 | Marked useful: 3,888 times
Delivery: Within 24 hoursABSTRACT
The importance of investment in economic growth cannot be overemphasized. This has led to an upsurge in the study of its determinants. This research therefore, seeks to investigate the impact of interest rate liberalization on investment in Nigeria from 1970-2012. Using the Error Correction Model (ECM), the result indicates that a long run relationship exists among the variables. The result further reveals that all the variables have significant impact on investment. The study equally shows that there is no differential impact of interest rate liberalization on investment in Nigeria during the pre and post-liberalization regimes. Also, the impulse responses of these variables to shocks in theextraneous variables were verified; using the Multiple-Equation VAR models. In addition, the variance decomposition result shows thatPeriod 2 shows a standard deviation value of 97.23 in investment resulting from own shock, 2.44 to a response to a shock from interest rate, 0.0186 to a response from market capitalization rate,0.205900 to a response to public expenditure and 0.101933 to response to trade openness. In period 10, investment responds positively with a standard deviation of 18.77 originated from own shock and standard deviation values of 8.05, 7.94, 12.43 and 15.59 arising from a shock from interest rate, market capitalization rate, public expenditure and trade openness respectively. It is recommended that polices to make interest rate attractive to investors as well as improve trade should be encouraged. Also broadening the capital market and improving infrastructure through increased capital expenditure should be pursued. In addition to these, there should be consistency in policies so that policy summersaults does not affect investment.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The Nigerian economy has at different times witnessed enormous interest rate swings in different sectors of the economy since the 1970s and mid 1980s under a regulated regime. The preferential interest rates were based on the premise that the market, if freely applied would exclude some priority sectors. Thus, interest rates were adjusted through the market forces in order to promote increased level of investment in the various preferred sectors of the economy. Prominent among the preferred sectors were the agricultural, manufacturing and solid mineral sectors which were accorded priority and deposit money banks were directed to charge preferential interest rates on all loans to encourage the upsurge of small-scale industrialization which is a catalyst for economic development (Udoka, 2000). According to Mckinnon (1973) and Shaw (1973), this situation can ignite financial repression which occurs mostly when a country imposes ceiling on deposit and lending nominal interest rate at a low level relative to inflation. The resulting low or negative interest rates discourage savings mobilization and the channelling of mobilized savings through the financial system. This has a negative effect on the quantity and quality of investment and hence economic growth.
Closely followed by the regulated interest rate regime was the interest rate reform, a policy evolved under the financial sector liberalization. The policy was put in place to achieve efficiency in the financial sector, thus, engendering financial deepening. In Nigeria, financial sector reforms started with the deregulation of interest rate in August, 1987 (Ikhide & Alawade, 2001). Since then, the Nigerian government has been pursuing a market determined interest rate which does not permit a direct state intervention in the general direction of the economy (Nyong, 2007).
Since the introduction of the interest rate liberalization concept in the 1980s, many countries such as Angola, Burundi, Congo, Ivory Coast, Ghana, Malawi, Nigeria, China, India etc.
This material content is developed to serve as a GUIDE for students to conduct academic research
Find What You Want By Category:
Delivery: Within 24 hours
Advertise Here
For advertisement, call 08168958821
Not what you were looking for? Perform a search
What's your project topic?
Comment on Facebook:
Related Project Materials
- 1.
EFFECT OF INFLATION ON SOCIOECONOMIC STATUS OF HOUSEHOLD IN NIGERIA
CHAPTER ONE INTRODUCTION Background of the Study Globally, high inflation continues to be a significant unresolved matter. It is a prominent concer...More »
Item Type: Project Material | 54 pages | 795 engagements |
- 2.
AN ASSESSMENT INTO THE EFFECT OF FEDERAL STUDENT LOAN DEFAULT RATES: IMPLICATION FOR THE NIGERIAN EC...
CHAPTER ONE INTRODUCTION Background of the study The higher education system in Nigeria has seen significant growth in recent decades, with a risin...More »
Item Type: Project Material | 54 pages | 703 engagements |
- 3.
AN EXAMINATION OF THE CAUSES AND EFFECTS OF ECONOMIC MELTDOWN IN NIGERIA (AN ASSESSMENT OF TINUBU AD...
CHAPTER ONE INTRODUCTION Background of the Study Economic meltdown, sometimes known as an economic crisis, can be described as a state of economic slo...More »
Item Type: Project Material | 54 pages | 1,157 engagements |
- 4.
AN EXAMINATION OF THE EFFECTS OF ECONOMIC STAGNATION ON NIGERIA ECONOMIC GROWTH AND DEVELOPMENT (A C...
CHAPTER ONE INTRODUCTION Background of the Study It is well acknowledged by all citizens that Nigeria and other countries are currently experiencing a...More »
Item Type: Project Material | 54 pages | 896 engagements |
- 5.
AN IN-DEPTH INVESTIGATION OF THE IMPLICATIONS OF ECONOMIC STAGNATION ON THE LIVELIHOOD OF RURAL DWEL...
AN IN DEPTH INVESTIGATION OF THE IMPLICATIONS OF ECONOMIC STAGNATION ON THE LIVELIHOOD OF RURAL DWELLERS CHAPTER ONE INTRODUCTION Background of the St...More »
Item Type: Project Material | 54 pages | 859 engagements |
- 6.
AN IN-DEPTH STUDY OF WIDESPREAD HARDSHIP IN NIGERIA(AN EXPERIENCE UNDER TINUBU ADMINISTRATION)
AN IN DEPTH STUDY OF WIDESPREAD HARDSHIP IN NIGERIA(AN EXPERIENCE UNDER TINUBU ADMINISTRATION) CHAPTER ONE INTRODUCTION Background of the Study The...More »
Item Type: Project Material | 54 pages | 977 engagements |