ABSTRACT

This research work aimed at determining the econometric study of relationship between interest rate and economic growth in Nigeria; the objective of the study was to empirically investigate extent at which interest rate has impacted on economic growth in Nigeria, to determine if there is any observed long-run relationship between interest rate and economic growth in Nigeria using modern econometric techniques; the data used source from secondary sources. It was hypothesized that there is no significant impact of interest rate on economic growth in Nigeria; the research used time series data, sourced mainly from Central Bank of Nigeria (CBN) bulletin; three models were estimated to capture the relationship between interest rate and economic growth (Model 1) Real Gross Domestic Product (RGDP) as the dependent variable (Model 2) Interest Rate (INT) (Model 3) Commercial Bank Credit to Private Sector (CPS) for both independent variables; the entire regression plane was statistically significant; this means that the joint influence of the explanatory variables (CPS and INT) on the dependent variable (GDP) is statistically significant; the cointegration test revealed the existence of long-run relationship between interest rate and economic growth in Nigeria; the study further recommends that there is need for government authorities to carry out far reaching reforms that would enhance the role of money market in funds mobilization and disbursement for investment purposes also government intervention in the economy is unavoidable; however, the government should know where, when and how to intervene.