Interest rate and its effect on economic growth: An issue for Nigeria industrial sectors

Abstract

It is believed that the real sector is one of the major drivers of the Nigerian economy. The interest rate policies of the central bank are targeted at credit delivery to the sector in order to spur economic activities and growth. How these interest rate policies of the central bank eventually affect the growth of the economy has become an issue of serious concern. The aim of the study is to determine the effect the impact of interest rates on the Nigerian economy's industrial sector. The descriptive survey design is used to investigate the characteristics of the variables of interest in this study. The information was gathered from the monetary and real sector data of Nigeria's central bank. From 2010 quarter 3 through 2020 quarter 1, the data is available. Inter-bank lending rate (IBR), Open Buy Bank rate (OBB), Standing Lending Facility rate (SLF), Standing Deposit Facility (SDF), and 91 clays Treasury Bill Interest Rate (91 TBR) were utilized as independent variables, with GDP of the industrial sector as the dependent variable. The independent variables are interest rates, whereas the dependent variable is industrial sector economic growth, as measured by industrial sector GDP. When the p-values of the coefficients are compared to their various levels of significance, it becomes clear that the standing lending and deposit facilities have a significant influence on the industrial sector's economic growth. As a result, it is suggested that banks offer the best interest rates in order to maximize their profit as a profit-making institution while also assisting in the mobilization of credit for the productive sector of the economy. This should also be the basis for central bank monetary policy.