Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Relationship between the Interest Rate and Manufacturing Sector Performance in Nigeria

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

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 CreditInterest RateManufacturing Sector OutputLending Rate

References

Adebiyi, M. A. & B. Babatope-Obasa (2004). Institutional framework, interest rate policy and the financing of the Nigerian manufacturing sub-sector. African Development and poverty reduction forum paper. Adofu, M. A. & Audu, S. I. (2010). An assessment of the effects of interest rate deregulation in enhancing agricultural productivity in Nigeria. Current Research Journal of Economic Theory, 2(2): 82-36. Adolphus, J. T. (2011). Modeling management rural lending and small business finance in Nigeria. Global Journal of Management and Business Research, 11(7): 30-46. Akinyomi, O. J. (2014). Effects of deposit volume on banks’ lending behaviour in the Nigeria post-consolidation era. International Journal of Innovative and Scientific Research, 4(1): 21-25. Amidu, M. T. (2006). The link between monetary policy and banks’ lending behaviour: The Ghanian case. Banks and Bank Systems, 1(4):38-48. Anthony, O., Gabriel, E. E. & Arikpo, O. F. (2015). The contribution of deposit money banks on the growth of the agricultural sector in Nigeria. Archives Research Journal, 3(2): 33-42. Charles, A. N. B. (2012). Investigating the performance of monetary policy on manufacturing sector in Nigeria. Arobian Journal of Business and Management Review, 2(1): 12-25. Chodechai, S. (2004). Determinants of Bank lending in Thailand: An empirical examination for the years 1992-1996. Unpublished Thesis. Davidson, S. & Gabriel (2009). Financial system regulation, deregulation and savings mobilization in Nigeria. International Journal of Business Management, 1(1):34-65. Dunmade, A. A. (2012). Investment analysis and portfolio management, volume I: An indept study of financial investment decisions. Lagos: Elite Trust Ltd. Ebere, E. J. & Iorember, P.T. (2016). Commercial bank credit and manufacturing sector output in Nigeria. Journal of Economics and Sustainable Development, 7(16), 189-196). Edame, E. (2008). Public finance, fiscal policy and public financial management in Nigeria. University of Calabar Press, Calabar, Nigeria. Emery, C. (1971). The use of interest rate policies as a stimulus to economic growth. International Finance Discussion paper: H676 in RFD series. Erinwa, N. (2016). Impact of rising interest rate on the performance of the Nigeria manufacturing sector. European Journal of Business and Management, 8(10), 1-10. Ettah, E. A. (2004). Doing business in Nigeria – the ultimate guide. Ugep: Ubetowan and Company Publishers. Ewert, R., Szczesny, A. & Schenk, G. (2000). Determinants of bank lending performance in Germany. Schmalenbach Business Review (SBR), 52:344-362. Ezirim, B. (2005). Finance dynamics: Principles, techniques and applications. Port Harcourt: Markowitz Centre for Research and Development. Khat, D. R. & Bathia, F. J. (1993). Financial intermediation, savings mobilization and entrepreneurial development: The African experience. International Monetary Fund Staff Paper, 27. Koutsoyannis, A. (2006). Theory of econometrics. New York: Palm grave Publishers. Loto, M. A. (2012). Global economic downturn and the manufacturing sector performance in the Nigerian economy. Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 3(1):38-45. Nnamdi, E. (2007). Deposit structure, lending rates and risk assets creation in Nigeria. Journal of Economic and Financial Research, 1(2). Nwakoro, A. N. (2017). Foreign exchange and interests and manufacturing output in Nigeria. International Journal of Business and Law Research 5(1) 30-38 Nyong, M. (2007). Government size, political freedom and economic growth in Nigeria, 1960- 2000. Journal of Third World Studies, 13:87-93. Odior, E. S. (2013). Macroeconomic variables and productivity of the manufacturing sector in Nigeria. A static analysis approach. Journal of Emerging Issues in Economics, Finance and Banking, 1(5): 362-379. Ojong, C. M., Arikpo, O. F. & Anthony, O. (2015). The role of deposit money banks on the growth of SMEs in Yakurr local government area, Cross River State, Nigeria. Journal of Social Science Research, 6(2):1047-1054. Ogar, A., Nkamere, S. E. & Effiong, E. (2014). Commercial bank credit and its contribution on manufacturing sector in Nigeria. Research Journal of Finance and Accounting, 5(22): 1-9. Okafor, U. O. (2012). Analysis of the impact of fiscal policy measures on capital formation in Nigeria. Nigeria Journal of Management and Administration, 5(7): 34-56. Okoye, V. & Eze, O. R. (2013). Effect of bank lending rate on the performance of Nigerian deposit money banks. International Journal of Business and Management Review, 1(1):34-43. Olokoyo, F. O. (2011). Determinants of commercial banks’ lending behaviour in Nigeria. International Journal of Finance Research, 2(2):1-12 Onakoye, A. B., Ogundajo, G. O. & Johnson, B. S. (2017). Monetary policy and the sustainability of the manufacturing sector in Nigeria. Review of innovation and competitiveness 3(4), 73-87 Rasheed, O. A. (2010). Interest rate determination in Nigeria. International Research Journal of Finance and Economics, 2(3):1-12. Shelile, T. (2006). The term structure of interest rates and economic activity in South Africa. Retrieved from: www.contentpro.seals.ac.za/iii/cpro/app?id=1860047715042217. Stightz, J. E. & Weiss, A. (1981). Credit rationing in market with imperfect information. American Economic Review, 17(3): 393-410. Udoka, C. & Roland, A. (2012). The effects of interest rates fluctuations on the economic growth of Nigeria. International framework, interest rate policy and the financing of the Nigerian manufacturing sub-sector. SAGA Publication Paper Forum, South Africa.

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT

Bridging Legal, Financial, and Data Governance in Enterprise AI: Emerging Trends

Author: Funmilayo Ashore-Onisemo, Ebehiremen Faith Iziduh, Uchechi Mary-Linda Unamma, Ifeanyichukwu Jeffrey Okwesa

Macroeconomic Policies and Economic Stability in Nigeria

Author: Abel-Tariah Emmanuel Onate, Okon, Ekanem Nsikhe, Nwenyi Francis Onwe

Determinants of Bank Liquidity in Nigeria

Author: Nelson Johnny Ebifemo-ere Stephen