IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 3 NO. 2 2018

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Relationship between the Interest Rate and Manufacturing Sector Performance in Nigeria

Ogar, Anthony, Eja, Basil Richard, & Gbenga Lawal Suleiman

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Abstract

This research paper investigated the relationship between interest rate and the manufacturing sector performance in Nigeria from the period 1981-2016. The wide interest rate spread and the irregular contribution of manufacturing sector to Gross Domestic Product in Nigeria necessitated this study. The study employed time series secondary data which were sourced from the central bank of Nigeria (CBN) statistical bulletin. The study applied several estimation techniques such as unit root to test for the stationarity, the Johanson cointegration test to verify long run association among the series and the vector error correction model as a verification of the short run adjustment. The results established the existence of a long run relationship among the variables, the results equally confirmed a negative but significant relationship between lending rate and manufacturing output in Nigeria. A positive but insignificant relationship between deposit rate and the manufacturing sector output was observed. Short run association between the variables was equally recorded. Bases on the findings, the study therefore recommends, that the Government through the central bank of Nigeria should develop strategies and policies geared at reducing the wide interest rate spread among commercial banks in Nigeria.

keywords:

Bank Credit, Interest Rate, Manufacturing Sector Output, Lending Rate

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