Interest Rate and Investment Decision in Nigeria: A Cointegration Approach

Abstract

The objective of this paper empirically investigated the influence of interest rate on investment decisions in Nigeria. The cointegration technique with its implied ECM was applied to estimate the data which covered the period between 1980 and 2012. The result shows that while high minimum rediscount rate and high prime lending rates have detrimental impact on aggregate investment, high treasury bill rates and high government stock rates have positive and significant impact of the level of aggregate investment in Nigeria. The ECM result shows a satisfactory speed of adjustment and a long run relationship also exists among the variables. The study shows that interest rates have differential impact on aggregate investment. The result recommends amongst others that to increase aggregate investment, the minimum rediscount rate and the prime lending rate should be lowered. Normal 0 false false false EN-US X-NONE AR-SA