The Impacts of Interest Rates on Bank Deposits, Investments and the Nigerian Economy
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Date
2008
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Publisher
Journal of Business Administration and Management
Abstract
In theory, interest rate is said to be positively related to bank deposits (savings) while it is negatively related to investments. What this means in effect is that high interest rates encourage savings but discourage investments. And without adequate investment, growth in the economy, as measured by the Gross Domestic Product is retarded. How has the Nigerian economy faired between 1990 and 2004, a period of fifteen years, in the face of changes in interest rates? In finding an answer to this and other questions, the researchers made use of secondary data. Using multi-linear regression analysis, it was found that there is a positive relationship between interest rates and bank deposits. Investments and prevailing interest rates, as expected, are negatively correlated. Though investments depend on prevailing interest rates, the dependence is rather too low, That the economy reacts differently to investments and bank deposits is obvious Other variables that affect the Nigerian economy should be adequately developed