Time Series Analysis of Interest Rate on Investment in Nigeria (original) (raw)
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The paper examines the impact of interest rates on investment in Nigeria from 1986 to 2018, using co-integration and vector error correction approach. The specific objectives were to estimate the short-and long-run elasticities as well as the error correction mechanism of interest rate, inflation rate and exchange rate on investment in Nigeria. The outcome of the exercise validated the hypothesis that interest rate has impact on investment in Nigeria, albeit with mixed results as the first lag period of all the three indicators used indicated positive relationship with the growth of investment but the lag of the second period all indicated negative impact on investment. The error-correction equation of investment indicates a feedback of 53.1 per cent, of the first period lag but 47.1 per cent, of second period lag. Also, the error-correction term indicated low speed of adjustment with only 2.0 per cent.
IMPACT OF INTEREST RATE ON INVESTMENT: THE NIGERIAN EXPERIENCE
Global scientific journals, 2022
The study investigated the impact of interest rate on investment in Nigeria. Annual time series data were obtained from the Central Bank of Nigeria Statistical for the period 1981 to 2019 on the variables used for the study. Unit root test was conducted using Augmented Dickey-Fuller test technique and the results showed that the variables were stationary though at different levels. Co-integration test was also conducted using Johansen co-integration test method and the result showed that the variables in the model were co-integrated meaning that the variables have a long run relationship. The error correction mechanism showed that the coefficient of multiple determination (R 2) in the overparameterized model was 0.92101 while it was 0.817812 in the parsimonious model. The short run regression result showed that external debt has a positive and insignificant impact on price stability in Nigeria. The short run result also showed that prime rate has a negative and insignificant impact on investment in Nigeria while interest rate has a positive and insignificant impact on investment in Nigeria. The result also showed that exchange rate has a negative and insignificant impact on investment in Nigeria while inflation has a positive and insignificant impact on investment in Nigeria while money supply has a positive and significant impact on investment in Nigeria. The result from long run dynamic analysis revealed that prime rate in the one period lag has a negative and significant impact on investment while interest rate in the one period lag has a positive and significant impact on investment. The result equally revealed that exchange rate in the one period lag has a positive and significant impact on investment while inflation in the one period lag has a negative and insignificant impact on investment. The result also showed that money supply in the one period lag has a positive and insignificant impact on investment. The result also showed that prime rate in the two periods lag has a negative and significant impact on investment while interest rate and exchange rate in the two periods lag have positive and significant impact on investment. Based on these findings, it was recommended that the government through the monetary authority should come up with monetary policies that will affect interest rate in such a way that investment will be stimulated.
Interest Rate and Investment Decision in Nigeria: A Cointegration Approach
American Journal of Business and Management, 2014
The objective of this paper empirically investigated the influence of interest rate on investment decisions in Nigeria. The cointegration technique with its implied ECM was applied to estimate the data which covered the period between 1980 and 2012. The result shows that while high minimum rediscount rate and high prime lending rates have detrimental impact on aggregate investment, high treasury bill rates and high government stock rates have positive and significant impact of the level of aggregate investment in Nigeria. The ECM result shows a satisfactory speed of adjustment and a long run relationship also exists among the variables. The study shows that interest rates have differential impact on aggregate investment. The result recommends amongst others that to increase aggregate investment, the minimum rediscount rate and the prime lending rate should be lowered.
Kampala International University Interdisciplinary Journal of Humanities and Social Sciences
The research analyzed the influence of interest rate on money supply and investment in Nigeria. It specifically analyzed the influence of working capital, return on investment, earning per share and gross operating profit on interest rate in Nigeria. Data was extracted from the Annual financial report of a manufacturing company using both descriptive research method and covariance while Autoregressive Distributed Lag Model (ARDL) and Vector Error Correction Model (VECM) were used to analyze the relationship which exist among the variables. The result of the findings showed that there is cointegration which implies aa long run relationship among the variables. The result revealed that Earning Per Share (EPS) had no significant impact on interest rate manufacturing firms in Nigeria. Furthermore, the result depicted that gross operating profit has a significant and positive impact on interest rate of manufacturing firms in Nigeria. The research recommends that financial managers increa...
2017
This study seek to amplify the chemistry between foreign direct investment, exchange rate, interest rate and economic development in Nigeria between the periods 1986 to 2015 using Auto Regressive Distributive Lag model. From the statistical report, we discovered that foreign direct investment and interest rate exhibit a direct relationship to economic development in Nigeria. Study further suggest that the low rate of interest promote investment paradox and thus stimulate economic development in Nigeria while the report from the exchange rate shows that if exchange rate is appreciating, economic development is been stimulated. This therefore suggest that an appreciating exchange rate is capable of attracting foreign investors and thus promote economic development as the case may be. The interrelationship between exchange rate, foreign investment and economic development is expected to be direct accordingly such that rise in exchange rate attract foreign investment and thus promote ec...
OLAWUYI FEMI A - IMPACT OF INTEREST RATE ON INVESTMENT DECISIONS IN NIGERIA full
The focus of this research work is based on the impact of interest rate on investment decision in Nigeria. Secondary data obtained from the central bank of Nigeria (CBN) statistical bulletin 2015. Data was collected and empirical analysis made. The Cointegration analysis was made, the result indicates that a long run relationship exists among the variables. The result further reveals that interest rate have significant impact on investment. Whereas, vector error correction model (VECM) is used to find short run association over the period of 2003-2015. It has negative relation in the long run but positive in short run. The study which reveals that high interest rate negatively affect investment. In line with the findings, the study made the following suggestions; that relevant monetary authority should evolve policies that will encourage savings and reduce prime lending rate to genuine investors, among others. It further recommend that since there is a direct relationship between income and savings, relevant authority should consider economic policies that will increase income level of the people in order to mobilize investment.
Investment and Macro Economic Performance in Nigeria
International Journal of Social Sciences and Humanities Review, 2019
This study examined investment and macro economic performance in Nigeria. The data were collected from the Central Bank of Nigeria statistical bulletin and the Nigeria Bureau of Statistics for the period ranging from 1980 to 2016. The ordinary least square technique of multiple regressions was used in analyzing the data. The result shows that GDP has a positive impact on investment and interest rate has a negative impact on investment in Nigeria. Other test such as multicolinearity, heteroskedasticity and autocorrelation were tested in order to ensure comprehension and adequacy of the research work. On the basis of my findings, it was discovered that an increase in GDP has a significant impact on the total volume of investment in Nigeria, while fluctuations in interest rate has negative impact on investment in Nigeria. The intercept shows that there are other factors other than the ones specified in the model which militates on investment growth in Nigeria. To the following observat...
Investment and Economic Growth in Nigeria : Evidence from Vector Error Correction Model
2015
The paper investigates the investment – growth nexus in Nigeria, for the period 1981-2012. Using the Vector Error Correction Model (VECM), the study finds that investment is cointegrated with economic growth in the country; that is, there is a long run relationship between investment and economic growth in Nigeria. The results further show that investment Granger causes economic growth in Nigeria. The paper argues that there is need for the government to invest heavily through appropriate mechanism, strong institutions and macroeconomic policies in order to result to economic progress and sustainable development in the country.
IMPACT OF INTEREST RATES DEREGULATION ON GROSS DOMESTIC INVESTMENT IN NIGERIA (1970-2015
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.
Determinants of Investment in Nigeria
2021
This study investigated the determinants of investment in Nigeria using time series data between 1981 and 2018. The study employed an expost facto research design and an econometric methodology using the Autoregressive distributed lag estimation technique to estimate a multiple regression equation. The study modelled gross domestic investment as a function of gross domestic product per capita, real interest rate, inflation rate, depth of financial development and real exchange rate. Findings from the Bounds test of the ARDL result indicate presence of long run relationship between gross domestic investment and its potential determinants. This led to the estimation of the Auto regressive distributed lag cointegrating and long run relationship. Specifically, the long run estimate shows evidence of a positive and statistically relationship between gross domestic product per capita and investment, a negative and statistically significant relationship between real interest rate and inves...