Author
UWAKWE Queendaline Chinyere (Ph.D)
Department of Economics Management and Social Sciences
Godfrey Okoye University Thinkers Corner Enugu Nigeria.
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Abstract
Research Objectives: The study examined the impact of interest rate spread on domestic investment in Nigeria, focusing on the relationship between lending rates, deposit rates, and monetary policy rates. It aimed to determine how variations in interest rate spread affect capital accessibility and overall investment performance in the economy between 1981 and 2024.
Methodology: To achieve these objectives, the research employed the Autoregressive Distributed Lag (ARDL) model and the Granger Causality test. These econometric techniques were used to capture both the short- and long-run dynamics of the relationship between interest rate spread and domestic investment, as well as to test the causal links among the key variables within the study period.
Findings and Conclusion: The results revealed that for a given lending rate, an increase in borrowing rate reduces the interest rate spread, thereby affecting bank gains. In contrast, lower lending rates tend to encourage investment in the economy, though they may also trigger economic contraction. The study concludes that interest rate spread significantly influences the accessibility of capital and the level of domestic investment in Nigeria, with lending and borrowing rates—largely guided by monetary policy—playing a decisive role in shaping bank performance and economic growth.
Key words: Interest Rate Spread, Domestic Investment, Deposit rate, Borrowing rate, Lending rate and monetary policy rate.
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