Interest Rate Variability And Investment Fluctuation In Nigeria
Akinleye Gideon Tayo Ph.D
Department of Accounting, Faculty of Management Sciences, Ekiti State University, Ado-Ekiti, Nigeria
Osho Augustine Ejededawe
Department of Accounting, Faculty of Management Sciences, Ekiti State University, Ado-Ekiti, Nigeria
Keywords: Financial Indication, Fluctuation, Indication of Interest, Interest, Variability, Investment
Abstract
This study examines interest rate variability and investment fluctuation in Nigeria. In carrying out this research, the study examines the causal and dynamic short-run nature of relationship between interest rate variability and investment fluctuation in Nigeria, using annual time series data spanning between 1980 and 2019. Following the lacuna from earlier studies in Nigeria on the impact of interest rate on economic growth or investment, without considering the causal and dynamic short-run nature of the relationship simultaneously in the literature, an econometrics technique of Ordinary Least Square (OLS), Johansen Co-integration and Pair-wise Granger causality were adopted to achieve the objectives of the study. Basically, Correlation Matrix and Descriptive Statistics were also used to assess the degree of association among the variables as well as to examine the nature of the data distribution. Thereafter, the researchers ascertained the stationary of the time series properties of the research variables, using Phillips-Perron (PP) unit root test. Besides, Johansen Co-integration test reveals that the variables for the model is not co-integrated and thereafter accepted at 5% significance level, which implies that there is no co-integrating vector among the variables of interest. This further led to the adoption of conventional Pair-wise Granger causality approach for the study. The short-run coefficients result showed that interest rate (INT), exchange rate (EXR) and output growth (GDP) impacted positively while inflation (INF) exhibited negative impact on investment respectively in the country. The Pair-wise relationship result indicates that investment fluctuation would do more to improve output growth and development of the economy in Nigeria. Based on the findings, it is recommended that since there is a direct relationship between INT, EXR, GDP; and INV, relevant authorities should consider economic policies that will further increase INT, EXR and GDP in the country in order to mobilize for more investment. Hence, the Nigerian government and policymakers should take cognizance of these variables during policy formulations.