IMPACT OF INTEREST RATE FLUCTUATION ON ECONOMIC GROWTH IN NIGERIA

The study examined the impact of interest rate fluctuation on economic growth in Nigeria covering the period 1986—2016. Annual data were collectedfrom secondary sources. The study estimated a multiple regression model using the ordinary least squares method. However, before model estimation was carried out, the Augmented Dickey-Fuller unit root test of stationarity of the time series variables and the Johansen-Juselius cointegration test were reported. Findings from the unit root test revealed that time series variables were integrated of different orders while the results of the cointegration test showed that a long-run relationship exist between the time series variables considered. Findings from the estimated regression model showed that monetary policy rate and maximum lending rate impacted negatively and significantly on economic growth, while savings deposit rate had positive but insignificant impact on economic growth during the period investigated. Based on these findings, it was recommended that the Central Bank of Nigeria (CBN) should pursue interest rate policies that encourage investment and economic activities in Nigeria. This could be ach ieved by a sustained reduction in the prime lending rate to investors so as to encourage them to borrow more money and increase their levels of investment. Lastly, the CBN should increase the channels offinancial access to the private sector to stimulate investment opportunities in the real sector of the Nigerian economy.