|Title: INTEREST RATE REFORMS, FINANCIAL DEEPENING, AND ECONOMIC DEVELOPMENT IN NIGERIA
EKONE Francis Azeakpono and ISIAKA Najeem Ayodeji
Actualizing economic development is the top priority for all the developing and emerging countries of the world. However, financial gap has been identified as the impeding factor limiting the actualization of economic development in most of the developing countries. Therefore, this study investigated the relationship between interest rate reforms, financial deepening, and economic development in Nigeria for the period of 38years between 1981 and 2018. Secondary data on the variables considered in this study are ratio of credit to the private sector to gross domestic product, the ratio of the money supply to gross domestic product, market capitalization, total national savings ratio of GDP, sectoral allocation to all sectors, prime lending rate, interest rate, inflation rate and they were gathered from Statistical Bulletin of Central Bank of Nigeria, 2018 edition, and World Bank indicators for 38 years between 1981 and 2018. Data were analyzed with the use of descriptive statistics, ADF, Johansen Co-integration, and ECM. The OLS revealed that the relationship among credit to the private sector to GDP, market capitalization, and economic development were positive but the relationship between prime lending rate, inflation rate, total national savings ratio of GDP, and economic development were negative over the period of time. Also, the study’s further proved that interest rate reforms do not Granger cause economic development within the period under review. Based on the findings, the study concluded that interest rate reforms and financial deepening significantly influenced economic development in Nigeria. Therefore, the study propose that monetary authorities should make sure that credits and financial instruments are properly managed and directs to the productive sector of the economy in order to fostering economic development objective.
|Keywords: Interest rate, Inflation Rate, Financial Deepening and Economic development.