IMPACT OF INTEREST RATE DEREGULATION REGIME ON THE NIGERIAN ECONOMY’S REAL (INDUSTRIAL) SECTOR

IMPACT OF INTEREST RATE DEREGULATION REGIME ON THE NIGERIAN ECONOMY’S REAL (INDUSTRIAL) SECTOR (ECONOMICS PROJECT TOPICS AND MATERIALS)

ABSTRACT

The banking sector is quite key to economic growth. More key is the cost of banking as it determines mobilization of savings, level of investment and hence industrial growth. Meanwhile, what is referred to as cost of banking is the interest rate. The nature of interest rate just like any typical price – mechanism is important to economic efficiency, effectiveness and equity. The wide spread notion is that market and price deregulation is a precondition to economic efficiency and prosperity. But market failure in the form of externalities has often proved to be a challenge in less developed countries. Here the researcher has examined empirically the impact of interest rate deregulation regime on the Nigerian economy’s real sector; Nigeria being a less- developed country. To do this, qualitative techniques were used in the form of reviewing various relevant literatures and theoretical positions of past researchers and economists of note. Quantitative techniques were not left out. Secondary data were deployed in the form of time-series sample and a model was specified and estimated in the form ofordinary least square (OLS) multiple equation with G.D.P as dependent variable and deposit- rate and lending rate as the independent variables. To evaluate the integrity of the process, the following test procedures were carried out including coefficient of determination (R2), standard error test of significance and test of significance (F-test). From the output of the process, appropriate analysis, presentation and interpretations were made. The work was concluded with a general summary, conclusion and recommendations made.

PREFACE

Here in this study, the deregulated interest rates were examined in relation to the real or industrial sector of the economy.

Given this, it should be expected that in a deregulated financial sector:’ there should be variegated interest rates that differ from one bank to the other. Contrary to this, the interest rates used in this study as stated in 4.2 (Data presentation) were the industry’s averages sourced from the CBN and NBS which, given the nature of keen competition in the banking industry, represent the deregulated interest rates as any significant deviation either from the industry’s averages or from that of any service provider, the sensitive elasticity implications of this would mean a substitution effect in line with the laws of demand and supply. Hence,we benefitted from the statistical knowledge of measures of central tendencies and that of dispersion when applied with economic bias to the financial banking sector. Close to this, is that the econometric study did not use the interest rate spread rather made use of differentiated interest rates. Hence, we have the savings rate and the lending rate as the independent variables of a multiple econometric model used.

IMPACT OF INTEREST RATE DEREGULATION REGIME ON THE NIGERIAN ECONOMY’S REAL (INDUSTRIAL) SECTOR (ECONOMICS PROJECT TOPICS AND MATERIALS)