Interest Rate and Investment Decision in Nigeria: A Cointegration Approach

Authors

  • Victor E Oriavwote Department of Social Sciences, Economics and Development Studies Programme, Federal University, Otuoke, P.M.B. 126, Yenagoa, Bayelsa State, Nigeria.
  • Dickson O Oyovwi Department of Economics, College of Education, Warri, Delta State, Nigeria

DOI:

https://doi.org/10.11634/216796061706519

Keywords:

Interest rates, investment, cointegration, Nigerian economy

Abstract

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.

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How to Cite

Oriavwote, V. E., & Oyovwi, D. O. (2014). Interest Rate and Investment Decision in Nigeria: A Cointegration Approach. American Journal of Business and Management, 3(1), 21–27. https://doi.org/10.11634/216796061706519

Issue

Vol. 3 No. 1 (2014)

Section

Articles

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