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The Relationship between Interest Rate and Economic Growth in Nigeria: ARDL Approach

Author

Listed:
  • Adegoke, Temitope Damilola

    (Department of Finance, Ekiti State University, Ado-Ekiti, Nigeria)

  • Azeez, Bolanle Aminat (Ph.D),

    (Department of Finance, Ekiti State University, Ado-Ekiti, Nigeria)

  • Ogiamien, Fidelis Omoruyi,

    (Department of Finance, Ekiti State University, Ado-Ekiti, Nigeria)

  • Osasona, Viscker Adedeji,

    (Department of Finance, Ekiti State University, Ado-Ekiti, Nigeria)

Abstract

This study examined the relationship between interest rate and economic growth in Nigeria, using secondary time series data. Data was collected from various issues of the Central Bank of Nigeria Statistical Bulletin and the National Bureau of Statistics. The study made use of the Augmented Dicker-Fuller (ADF) unit root tests and it was discovered that the variables were not in the same order at level, hence, the use of Autoregressive Distribution Lag (ARDL). The GDP was used to proxy economic growth as dependent variable, while Lending Rate (LR), Exchange Rate (EXC) and Treasury bill Rate (TB) were used as independent variables. It was discovered during the findings that there is a very strong long run relationship among the dependent and the independent variables and the speed of adjustment on equilibrium was set at 79.4%. The result also discovered that there is a negative relationship between the lending rate and the GDP though, statistically insignificant, while positive relationship exists between the GDP, Treasury bill rate and Exchange rate. The paper recommended that the Lending rate has some policy implication on economic growth in Nigeria and the monetary authority should handle it with care and the government should find a way of making the Treasury bill rate more attractive to the investing public

Suggested Citation

  • Adegoke, Temitope Damilola & Azeez, Bolanle Aminat (Ph.D), & Ogiamien, Fidelis Omoruyi, & Osasona, Viscker Adedeji,, 2021. "The Relationship between Interest Rate and Economic Growth in Nigeria: ARDL Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(07), pages 350-355, July.
    • Handle: RePEc:bcp:journl:v:5:y:2021:i:07:p:350-355
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    References listed on IDEAS

    as
    1. Tomola M. Obamuyi & Sola Olorunfemi, 2011. "Financial reforms, interest rate behaviour and economic growth in Nigeria," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(4), pages 1-2.
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