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. 9 NO. 5 2024
DOI: 10.56201/ijefm.v9.no5.2024.pg121.150

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Predictive Power of The Determinants of Interest Rate Spread in Nigeria: (1991-2020)

Agoh, Ndubuisi, Ogbulu, Onyemachi Maxwell, Ejem, Chukwu Agwu

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Abstract

This study examined the determinants of interest rate spread in Nigeria from 1991 to 2020. The objectives were to determine the impact of monetary policy rate, inflation, exchange rate, oil price and fiscal policy on interest rate spread in Nigeria. Data were collected from CBN statistical bulletin 2021. Analyses were carried out using unit root test, OLS Multiple regression analysis, Johanssen cointegration test and ECM model. Findings show that all the variables are integrated in 1(1). Results also showed that inflation rate has significant impact on interest rate spread using OLS regression analysis. From the ECM model, all the variables were found to be significant determinants of interest rate spread in the long run. The study concludes that only inflation is a strong determinant of interest rate spread in Nigeria both at the short run and at the long run among the variables investigated. It therefore recommends that the policy of inflation targeting should be sustained and the Central Bank of Nigeria should review its monetary policy rate to ensure effectiveness in achieving monetary stability.

keywords:

Inflation, Interest rate spread, Exchange rate, Fiscal policy, Oil price, ECM

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