Abstract
This study focused on the effect of interest rate policy on the growth of the Nigerian economy. It sought to assess the significance of interest rate, and to suggest measures that could enhance economic growth in Nigeria. To achieve the objective of the research, some macroeconomic indicators in the Nigerian economy, using an ex-post facto research design were applied. The data were analyzed using the Ordinary Least Square (OLS) method. From the examination, it was uncovered that there was a huge connection between financing cost and GDP in Nigeria. It was additionally found that there was a huge connection between rate for currency exchange and total national output in Nigeria. Inflation was likewise found to significantly affect total national output in Nigeria. In light of these discoveries, it is suggested that the Central Bank of Nigeria (CBN) ought to structure policy framework on the rate of interest that will dependably support and encourage culture of savings in the real sector. This can be accomplished by expanding the rate accruing to savings from foreign and local investors. Additionally, aggregate economic output should be seen as the bane of government policy thrust, through bringing down of rate charged to lending and expanding rate to savings, as this improves financial development.
Highlights
Money as a store of value and medium of exchange creates different types of claims
The findings showed that discount rates, represented by interest and monetary policy rates, had significant effect in the short-run, and showed positive and significant effect in the long-run on economic development
The study empirically examined the effect of interest rate policy on the growth of the Nigerian economy
Summary
Money as a store of value and medium of exchange creates different types of claims. Essentially, those who lend money, expect to be compensated for handing over their liquidity for a stated period of time to users of money. In the event that the enthusiasm on investment funds is empowering; people would be urged to spare more money not meant for consumption for investment, and this may allow for accessibility of loanable assets in the bank, and subsequently, improving development in the economy (Emori et al, 2017) It is an imperative segment of the aggregate returns of numerous ventures, as interest rate give knowledge into future financial markets and monetary framework, in view of the dominance role interest play in the Nigerian economy (Powell, 2015). Examining the effect of the rate of interest on gross domestic product in Nigeria; ii) Investigating the effect of the rate of exchange on gross domestic product in Nigeria; iii) To examine the effect of inflation on gross domestic product in Nigeria
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