IMPACT OF INTEREST RATE POLICY ON INVESTMENT IN THE NIGERIA ECONOMY
ABSTRACT
The focus of this research work is based on the impact of interest rate policy on investment in the Nigerian economy between the period of 1981 − 2009. because interest rate and investment is at core of economic stabilization. The objective of this study is to examine the impact of interest rate policy on Nigeria prior to interest rate regulation in 1987 and to serve as a guide on how interest rate can be fixed to enhance effective accumulation of savings that can be channeled to investment. The study employed the ordinary least square technique which also employ. Secondary data obtained from the central bank of Nigeria (CBN) statistical bulletin. The main findings revealed that there is a negative relationship between interest rate and investment and also there is a significant relationship between savings and interest and finally, recommendations were made on how interest rate can be performed optimally.
CHAPTER ONE
Introduction
1.1 Background Of The Study
Interest rate policy in Nigeria is a major instrument of monetary policy with regard to the role it play in the mobilization of financial resources with the aim to promote economic development and growth. Interest rate due to it importance in the financial sector of the economy can be a major tool in promoting growth and development of the economy.
Prior to August 1986 interest rate in Nigeria was generally fixed by the Central Bank of Nigeria with periodic adjustments depending on the government sectoral priorities (Ucendu 1993). On 31 July , 1987, however the Central Bank of Nigeria announced the deregulation of interest rate, that is abolished (with effect from 1 August 1987) all control on SAP during the Ibrahim Babangida regime, stated that interest rate became market driven that is, hence be determined by the forces of demand and supply.
Again, it also focuses on trade liberalization in order to stimulate exports and correct price distortions, the need for financial liberalization was also realized. The steps that were taken in this regard were interest rate deregulation, introduction of an auction market for treasury bills, the identification of insolvent bank for restructing, the introduction of more stringent prudential guideline for Bnaks, increase in banks minimum capital requirement and up grading and standardization of accounting procedures. Not all of these measures were implemented simultaneously however, interest rate deregulation was the first step.
However, in a policy reversal, the government in January 1994 out rightly introduced some measure of regulation of interest rate management. It was claimed that there were it wide variations and unnecessarily high rate under the complete deregulation of interest rate immediately, deposit were once again set at 12% − 15% per annum, while a ceiling of 21% per annum was fixed for lending.
The cap on interest rate introduced in 1994 was retained in 1995 with a minor modification to allow for flexibility. The cap stayed in place lifting remained in force in 1997, thus enabling the pursuit of flexible interest rate regime in which bank deposit and lending rate were largely determine by the forces of supply and demand for fund.
Since 2004, the monetary policy committee of the central bank in Nigeria has been meeting to deliberate and if possible fix the monetary policy rate depending on the performance of the economy (CBN website). In 2004, the lending rate was 20% while the minimum rediscount rate (MRR) was 15% the time deposit rate for the same period was 10.8% while saving rate was 4.9% (NDIC 2002 Annual Report).
The adoption of the two interest rate regime in Nigeria provides a case study for Keynesian investment theory as well as Mckinnon and Shaw hypothesis. Hence, many reason abound while people and interest, these include the direction of interest rate, the expected rate of return from such investment etc.
This work will focus on the understanding and identification of the relationship that exist between the interest rate, saving and investment the Keynesian theory implies that low interest rate as a determinant to increase investment demand.
1.2 Statement Of The Problems.
The financial system of most developed countries like Nigeria came under stress as a result of the economic stock of the 198os. Additionally, financial repression, largely manifested through indiscriminate distortions of financial prices including interest rate, has tended to reduce the reat of growth and the size of financial system relative to non-financial magnitudes more importantly financial repression has retarded the development process as envisage by Shaw.
In this research work certain problem will be encountered among which are:
- Is there any effect which interest rate policy has on investment?
- Has interest rate policy made any Significant impact on the level of investment?
- To what extent has the variation of interest rate in Nigeria over the year been a problem to investment?
1.3 Objective Of The Study
The major objective of this study is to determine the impact of interest rate policy on investment in the Nigeria economy, in order to achieve the above goal, this study has the following as its specific objectives?
- To critically examine the effect of interest rate policy on investment in Nigeria economy.
- To ascertain how other variables such as consumption, Saving, Exchange rate as well as gross domestic product (GDP), that is the level of income affect investment in Nigeria.
- To examine the impact of interest rate policy on Nigeria prior to interest rate regulation in 1980.
- To make appropriate policy recommendation based on the findings.
1.4 Research Question
In this work the following questions shall be looked into.
- Is there any relationship between interest rate policy and investment in Nigeria economy?
- How can we identify the types of relationship between interest rate policy and investment in Nigeria?
- How do we examine the relationship between government development, investment and interest rate?
- Is there any relationship between interest rate and gross Domestic Product (GDP) in the Nigeria economy?
1.5 Research Hypothesis
In view of the objectives of the study, the research hypothesis will be tested as follows:
Ho: there is no positive relationship between the interest rate and investment in the Nigeria economy.
Hi: there is a positive relationship between interest rate and investment in the Nigeria economy.
1.6 Significance Of The Study
This study is very vital because Nigeria economy over the years have been faced with problem of appropriate interest rate policy that could efficiently sustain investment and enhance economic growth and development.
Again, this project is meant to find the various kind of interest rate polices that have been used over the year and how it have been able to affect the rate of investment positively or negatively.
1.7 Scope And Limitations Of The Study.
This study will look on the effect of interest rate policy on the level of investment in the Nigeria economy during the period of 1981-2009.
This study has the intention of looking into how Nigeria could solve her numerous macro economic problems and achieve full economic growth and development by increasing the level and rate of investment. This work also intend to bring out the best interest rate policy that would suit and enhance Nigeria Public investment.
In the other hand, the researcher has so many limitations and problems against this work. One of them is finance. A work of this nature require huge amount of money. The researcher has to travel to many places like banks, example central bank of Nigeria and many other financial institutions to collect data and materials for this work.
Another limitation is the refusal of top government and bank of officials. Working in the selected financial institutions billed for this work to grant the researcher audience and give him the relevant information, materials and data he need for this work.
CHAPTER TWO
2.0 Literature Review
2.1 Introduction
The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …
Procedure for Downloading the PDF (Docx) Material
Impact of Interest Rate Policy on Investment in the Nigeria Economy can be downloaded by requesting the full set of materials at the project or seminar cost. The document will be sent via Microsoft Word (MS-Word) format via WhatsApp (e-mail) following payment confirmation.
| Seminar Material Cost ₦3,000 | Project Material Cost ₦5,000 |
Request Complete Material
 | Click here to request the Complete Material via WhatsApp including;
|
Disclaimer for Complete Material Utilization
The displayed research work titled "Impact of Interest Rate Policy on Investment in the Nigeria Economy" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.
Frequently Asked Questions (FAQ)
Can the material for “The Influence of Extra Mural Classes on Student Academic Performance in Social Studies in Junior Secondary Schools Influence of Extra Mural Classes on Student Academic Performance in Social Studies in Junior Secondary Schools” be used as a guide for Social Studies Project?
Yes it can be used — This project investigated the influence of Extra mural Classes on student Academic performance in Social Studies in Junior Secondary Schools in Ijebu-Ode Local Government Area of Ogun State. The cardinal purpose of this project was to find out the influence of extramural classes on students’ Academic performance, and to ascertain if the purpose of introducing extramural classes into the educational system has been achieved. In order to achieve the purpose of this study, a self designed Teacher Questionnaire on the project title was used to gather information from teachers. The systematic random sampling technique was used to collect data of fifty teachers from ten Junior Secondary Schools in Ijebu-Ode, Ogun State. The responses gathered from the teachers were analysed using chi-square …
Can the material for “Relationship Between the Service of Computer and Banking Activities and the Contribution of Computer Application Toward Banking Activities in Economy” be used as a guide for Banking and Finance (BF) Project?
Yes it can be used — This project topic of mine was derived after many research in many libraries and also consulting of people who are legend in this specialization, which had helped me in computing this project. The effects of computer application in the modern world has helped in making this work easier and neither for workers, it has bring a tremendous development in the entire world, and has given insight into what banking sector is all about, its guiding principles and the environment within which banking sector operate. It has also helped in broaden the mind of the researchers by passing information and analyzing complex problem that computer specialist in banks can face in the course of banking activities. …
Can the material for “Teachers Perception of Difficult Areas in Senior Secondary School Biology Curriculum” be used as a guide for Education Project?
Yes it can be used — This study sought to identify teachers’ perceptions of difficult areas in senior secondary school biology curriculum in Lagos state of Nigeria. Based on a review of literature, five research questions guided the study while three hypotheses were equally tested. A survey design was used for the study. A multistage sampling procedure involving simple random sampling techniques by balloting and cluster sampling techniques were adopted to compose the sample of 120 biology teachers in four Education Zones of Lagos State. A Structured Questionnaire Titled Biology Topic Assessment Questionnaire (BTAQ) was used to collect data from the respondents. The data collected were analyzed using mean, standard deviation and one-way ANOVA to test the hypotheses at 0.05 level of significance. The analysis of the …
Is the topic “Tax Knowledge, Tax Attitude, and Perception of Tax Fairness as Predictors of Tax Compliance Among Income Earners” recommended for Psychology Project?
Yes it is highly recommended — This study was carried out to examine the tax knowledge, tax attitude, and perception of tax fairness as predictors of tax compliance among income earners in Lagos state. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of 300 (three hundred) respondents were selected for this study to represent the entire population of the study. For null hypotheses were formulated and tested using the one-way ANOVA and the t-test statistical tools at zero point zero five (0.05) level of significance. Primary data were collected from the primary source which questionnaire was used as an instrument of data collection while secondary data were sources from textbooks, …
Can the material for “Influence of Home Environment on Academic Achievement Among Secondary School Students” be used as a guide for Environmental Science Project?
Yes it can be used — The principal aim of this research is to ascertain the influence of the home environment on academic achievement among secondary school students. To determine this, four research questions where formulated which comprises the questionnaire that was used to solicit factual information from students in Egor local Government area in Edo State through proportionate stratified random sampling techniques. The sample used consisted of hundred students. The data was analyzed by the use of percentages, the factor investigated includes performance of secondary school student in relation to parental socio economic status, parents involvement with school works and other variables in the home environment that may influence student achievement. …
Can the material for “A Critical Examination on Land Use and Allocation Procedure” be used as a guide for Public Health Project?
Yes it can be used — The aim of this project is to examine and evaluate the physical, social and economic effects of the present location of land use activities the Owerri Urban and recommend solution to the problems identified. Thus it involves the examination and analysis of the extend of development of land use activities problems caused by the development of these land use activities. The impact of government programmes and policies as regards the pattern of development and finally to suggest alternative strategies to overcome the identified problem in the area. To achieve these, the methodology employed by the Author under primary collected in the field survey, which includes observation, interview, informal discussion and the use of questionnaires. The secondary data etc. Due to the peculiar …
Can the material for “Synergistic activity of salvia officinalis(sage leaf) and antibiotics against typhoidal salmonella species” be used as a guide for Microbiology Project?
Yes it can be used — Salvia officinalis L. from the family Lamiaceae, is a worldwide cultivated aromatic herb that is endemic. Investigation reveals the following problems of the synergistic activity of salvia officinalis (sage leaf) and antibiotics against typhoidal salmonella species research work; improper evaluate of the synergistic activities of S. officinalis against typhoidal salmonella species, lack of proper information relating to the estimation of the total phenol content (TPC) and flavonoid content (FC) of S. Officinalis (Sage Leaf), and Improper investigation of the gas chromatography (GC) analysis conditions and disc diffusion method used during synergistic activities. The aim of the Study is to investigate the synergistic activity of salvia officinalis (sage leaf) and antibiotics against typhoidal salmonella species; In achieving this aim, the following …
Can the material for “Problems and Prospects of Personal Income Tax in Nigeria” be used as a guide for Accountancy / Accounting Project?
Yes it can be used — This Paper examines the problems associated with the Assessment and Administration of Personal Income Tax on Motorcycle riders in (UMUGUMA) Owerri West LGA Metropolis. The study uses Primary data involving face-to-face interviews and observations, while descriptive survey was used to analyze the data. The paper utilizes the stratified random sampling technique in selecting 28 units out of the 294 units in the Metropolis. One hundred and fifty (150) Umuguma were randomly selected, observed and interviewed using the interview and uncontrolled/unstructured observation method. The main findings of the research are that, tax officials lack adequate training and experience in carrying out their assignment. Similarly, shortage of staff, payment default on Direct Assessment Tax System (DATS), insufficient financial resources available to the …
Can the material for “The Impact of the Global Economic Meltdown on the Achievement of the Millenium Development Goals in Nigeria” be used as a guide for Public Administration (PA) Project?
Yes it can be used — This research work is a critical analysis of the Impact of the Global Economic Meltdown on the Achievement of the Millennium Development Goals in Nigeria, with special reference to Ebonyi state. The study identified the impact of Global Economic Meltdown on some elected Millennium Development Goals in Nigeria, traced the historical background of the Global financial crisis, its implications on the Nigerian economy, the various features of the Global financial crisis. Based on data collected from the respondents who reacted on the questionnaire given to them. The study concluded that Global Economic Meltdown has a significant relationship with the Achievement of the Millennium Development Goals and that with total commitment to the targets, the Millennium Development Goals will be achieved …
Can the material for “Impact of Entrepreneurship Training Programme on Poverty Reduction in Akwa Ibom State” be used as a guide for Entrepreneurship Project?
Yes it can be used — The study was carried out to ascertain the Impact of Entrepreneurship Training Programme on Poverty Reduction in Akwa Ibom State. In achieving this aim, the following specific objectives were laid out to analyze the political leadership of the area that has affected entrepreneurship skill acquisition and examine the issues of lack of continuity and consistency affect the entrepreneurship training programme. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of 180 (one hundred and eighty) respondents were selected for this study to represent the entire population of the study. For null hypotheses were formulated and tested using the one-way ANOVA and the t-test statistical tools …