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Article Title:
The Micro Economic Implication of Interest Rate Policy on Private-Domestic Investment in Nigeria: 1980-2010
by Fawehinmi, F.O.

Abstract:
Nigeria?s macroeconomic indicators reflect poor performances of private domestic investment in Nigeria between 1986 and 2005. The question that arises is: do Nigeria?s interest rate policies actually have any effect on private domestic investiment? Arising from this problem; this study however examined empirically the economic implication of interest rate policy on private domestic investment in Nigeria using time series data which spanned 1980 to 2010. The study which used an error correction mechanism precipitated results which are in tandem with the findings of existing literature that private investment has a stronger and more favourable effect on growth than public investment. This trend is suggestive of the general believe that private investment tend to be more efficient and less prone and susceptible to corruption. The significant role played by governance in explaining the long-term pattern of domestic investment in Nigeria constitutes the distinctive feature of the study. The study revealed that within a long-run framework; a well structured and stable socio-economic environment could boost domestic investment. The findings of this study support the need for the government to reduce the interest rate within the economy so as to give a boost to private sector participation in domestic investment.

Keywords: interest rate, private domestic investment, private sector, public investment, corruption.

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