INFLUENCE OF INTEREST RATE STRUCTURE ON ECONOMIC GROWTH IN NIGERIA

Abstract

This study examined the effect of interest rates on the economic growth of Nigeria between 1981 and 2024. The specific objectives were to assess the effect of the prime lending rate, monetary policy rate, and savings interest rate on real gross domestic product (RGDP). The study employed an ex-post facto research design and used the Ordinary Least Squares (OLS) method for hypothesis testing, supported by unit root and descriptive analyses. The findings revealed that the prime lending rate had a positive and significant effect on RGDP, the monetary policy rate also showed a positive and significant effect, while the savings interest rate had a positive but non-significant effect on RGDP within the period under review. Based on these results, the study recommended that the Central Bank of Nigeria and commercial banks ensure that prime lending rates remain stable and affordable for productive sectors such as agriculture, manufacturing, and SMEs. It further suggested that monetary authorities use the monetary policy rate proactively to stimulate economic activity, while policies should be designed to strengthen the link between savings and investment through competitive savings rates and financial inclusion strategies. This study contributes to literature by providing updated evidence on the role of interest rate components in Nigeria’s economic growth.