Impact of interest rate liberalization on the real sector output in Nigeria: A Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model
Keywords:
Interest liberalization, Real sector output, Manufacturing sector output, Agricultural sector outputAbstract
This study examined the impact of interest rate liberalization on the real sector output in Nigeria from 1987 to 2024. The specific objectives of this study include: (i) to investigate the impact of real interest rate liberalization on the manufacturing sector output in Nigeria, and (ii) to assess the effects of real interest rate liberalization on agricultural sector output in Nigeria. The method of data analysis was the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. The empirical results showed that real interest rate liberalization has a negative and statistically insignificant impact on the manufacturing sector in Nigeria (Z–statistics (-0.332902), Prob-value 0.7392 > Sig-value 0.05) and similarly has a negative and non-significant effect on the agricultural sector in Nigeria (Z–statistics (-1.2220), Prob-value of 0.2217 > Sig-value 0.05). The study recommended that the Nigerian government, through the central bank, should consolidate the gains of financial sector liberalization by implementing policies that enhance credit access for the private sector in order to stimulate output growth. Furthermore, banks should be incentivized to lower lending rates and borrowing costs to encourage domestic investment.
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