Paper Title
Interest Rate Regimes and Private Investment in Nigeria, 1970-2016
Abstract
Given the role that private investment plays in the development of an economy as regard achieving macroeconomic
goals, there is need to examine those variables that determine it and their various effects on private investment in Nigeria. As
such, increase in private investment will increase employment, out –put and exports. Accordingly, this study set out to
examine the effect of interest rate regimes on private investment in Nigeria from 1970-2016. The research utilized the modern
theory of interest rate (a combination of classical and Keynesian theories). Time series data were sourced from secondary
sources like Central Bank of Nigeria (CBN) statistical bulletin various years and World Bank Development indicators (WDI).
The data were analysed using OLS method of estimation and the Autoregressive Distributional lag (ARDL) techniques. The
data used were on private investment (PINV) as dependent variable while real interest rate (RINR), interest rate regime proxy
by a dummy variable (DUMt), inflation (INF), exchange rate (EXR), financial sector efficiency (FSE), fiscal deficit (FD) and
foreign direct investment (FDI) served as independent variables. The results of the analysis revealed that RINR, INF and FSE
were not statistically significant in determining private investment while DUMt, EXR, FDI and FD were statistically
significant in determining private investment. The policy implication of this finding is that interest rate regimes like changing
from regulation to deregulation can affect private investment negatively. Based on these findings, the paper therefore
recommends that the government should allow deregulation of interest rate in order to boost savings and in turn increase
private investment in the Nigerian economy. This can be achieved by the apex monetary authority (CBN) if it is consistent
with the policy of interest rate deregulation but with caution- adherence to the Prudential Guidelines in implementing interest
rate policy as enshrined in Banks’ and other Financial Institutions’ (BOFI) Decree of 1991(Variously Amended).
Index Terms - Interest Rate, Regime and Private Investment