IMPACT OF INTEREST RATES DEREGULATION ON GROSS DOMESTIC INVESTMENT IN NIGERIA (1970-2015 (original) (raw)

The high rates observed during the era of interest rates deregulation have been frequently blamed for investment contraction in Nigeria. The study investigates " the impact of interest rates deregulation on gross domestic investment in Nigeria 1987-2015 ". Ex post facto research design was adopted to authenticate the proficiency and efficiency of interest rates deregulation on Gross Domestic Investment employing the use of Augmented Dickey-Fuller (ADF) and Philips-Perron (PP) unit root tests, Engle-Granger and Philips-Ouliaris as well as Canonical Cointegrating Regression (CCR) technique in analyzing data gotten from CBN bulletin. The result revealed that in the long run, interest rate is inversely but insignificantly related to domestic investment in Nigeria. Meanwhile, the result clearly shows that Exchange rate, Savings and Deregulation are the significant determinants of investment in Nigeria. This means, the adoption of interest rate deregulation has enormous significant positive impact on the level of domestic investment in the country. The study concludes that although investment does not depend on interest rate alone, interest rates deregulation enhances domestic investment in Nigeria. Therefore, in this period of critical need for reformation of all sectors of the Nigerian economy, deregulation of interest rate, measure to enhance exchange rate and encourage savings should be maintained with a view to removing all impediments to free flow of businesses in the country. Also, monitoring mechanism should be put in place to ensure proper channelling of loanable funds to encourage domestic investment in Nigeria.