IMPACT OF INTEREST RATE ON DOMESTIC SAVINGS AND INVESTMENT IN NIGERIA

Abstract

The study investigated the impact of interest rate on savings and investment in Nigeria during the period 1980 – 2023. The objectives of the study were to determine the impact of interest rate on savings in Nigeria: to examine the impact of interest rate on investment in Nigeria. Secondary sources of data were gotten from Central Bank of Nigeria Statistical Bulletin. The study employed the contemporary econometric techniques of cointegration and error correction mechanism, to establish the long run relationship among the chosen variables. The included variables were domestic investment, prime lending rate, maximum lending rate, monetary police rate and savings. The results show that Interest rate has significant effect on savings in Nigeria, Interest rate has significant impact on investment in Nigeria. Based on these findings, the study recommends among other things that the monetary authorities should make policies which would help to improve the saving culture of the people such as increase in the deposit rate which would lure the people to deposit their money in banks thereby increasing the supply of loanable funds. This would lead to a fall in interest rate and eventually rise in investment. A reduction in the prime lending rate to investors so as to encourage investors to borrow more and increase investment.