Interest Rate and Domestic Private Investment in Nigeria

Abstract

The study investigated the relationship between Interest rate and Domestic Private Investment in Nigeria. The aim of the study is to examine the impact of interest rates and Private Domestic Investment in Nigeria from 1980 to 2015. Ordinary Least Square Regression was adopted to determine the relationship among the variables employed in the study. Gross Domestic Product served as the independent variable while the Real Interest Rates and Prime Lending Rates were the independent variables. The findings showed that the Real and Prime Lending Rates are negatively related to Private Domestic Investment and statistically significant at 5%. The coefficient of determination showed that only 23% of the variation in the private domestic investment was accounted for by interest rates. This shows that the predictive power of the model is very weak. This paper concluded that the success of promoting the Private Domestic Investment does not depend only on interest rates though it should not be neglected. Based on these findings, the study recommended amongst others that monetary authorities should promote policies to improve deposits and also make available loanable funds as this plays a vital role in promoting Private Domestic Investment in Nigeria

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