Sunday, 12 November 2017

THE IMPACT OF INTEREST RATE ON INVESTMENT DECISION IN NIGERIA. AN ECONOMETRIC ANALYSIS

ABSTRACT
The focus of this research work is based on the impact of interest rate on 
investment decision in Nigeria. An econometric analysis between the periods of 
1981-2010. Secondary data obtained from the central bank of Nigeria (CBN)
statistical bulletin (volume 21) DEC 2010. Date was collected and empirical 
analysis made. To achieve these objective multiple regression was used in 
analyzing the data that the impact of interest rate on Nigeria prior to interest rate 
regulation in 1.986 and serve as guide to how interest rate can be fixed to 
enhance effective accumulation of savings that can channel to investment. Policy 
recommendation Government should in massively embarks on large-scale 
agriculture, manufacturing industrialization e.t.c and equally encourages small 
and medium scale enterprise (SMES). Public private partnership (ppp) should 
also be encouraged by government for efficient and effective production.

TABLE OF CONTENTS

Title page - - - - - -
Approval or Certification - - - - - -
Dedication - - - - - -
Acknowledgement - - - - - -
Abstract - - - - - -
Table of Content - - - - - -
CHAPTER ONE
INTRODUCTION
1.1 Background of Study - - - - -
1.2 Statement of the Problem - - - - - -
1.3 Objective of Study - - - - - -
1.4 Statement of Hypothesis - - - - - -
1.5 Significance of Study - - - - -
1.6 Scope and Limitation - - - - -
CHAPTER TWO
THEORETICAL LITERATURE AND EMPIRICAL REVIEW
2.1 Interest Rate Volatility and Investment - - - -
2.1.2 Interest Rate and Corporate Finance - - -
2.1.3 Volatility Impact on Market Returns - - -
2.1.4 Market Performance and Volatility - - -
2.1.5 Factor that Affect Volatility - - - -
2.1.6 The Cyclical Volatility of Interest Rate


2.1.7 Why does Interest Rate Volatility - - - -
2.1.8 Interest Rates, Bond Price and Structure - - -
2.1.9 Measuring the Volatility of Interest Rate 
2.1.10 What Determines Interest Rate Volatility - - -
2.2 Empirical Literatures - - -
2.2.1 The Investment Function - - - -
2.2.1 The Investment Function - - - -
2.2.2 Monetary Policy in Nigeria - - - -
2.3 Limitation of Previous of Study - - - -
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introductions - - - -
3.1 he Model Specification - - - -
3.1.1 Mathematical Specification Model - - - -
3.1.2 Econometric Specification of Model - - -
3.2.2 Method of Evaluation - - -
3.3 Justification of Model - - -
3.4 Data Require and Source - - - -
3.5 Econometric Software Packages - - - -
CHAPTER FOUR
REGRESSION RESULTS AND ANALYSIS
4.1 The Result Presentation - - - -
4.2 Evaluation of Result

4.3 Econometric Tests - - - -
4.4 Test for Heterscedasticity Test - - - -
4.5 Test for Multicollinearity - - - -
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary - - - -
5.2 Conclusions - - - -
5.3 Recommendations - - - -
Bibliography 
Appendix

CHAPTER ONE
INTRODUCTION

1.1 Background of the Study
Investment is the change in capital stock during a period. Consequently, unlike 
capital, investment is a flow term and not a stock term. This means that capital is 
measured at a point in time, while investment can only be measure over a period 
of time.
Investment plays a very important and positive role for progress and prosperity of 
any country. Many countries rely on investment to solve their economic problem 
such as poverty, unemployment etc (Muhammad Haron and Mohammed Nasr 
(2004).
Interest rate on the other hand is the price paid for the use of money. It is the 
opportunity cost of borrowing money from a lender to finance investment project. 
It can also be seen as the return being paid to the provider of financial resources, 
for going the fund for future consumption. Interest rates are normally expressed 
as a percentage rate. The volatile nature of interest is determined by many 
factors, which include taxes, risk of investment, inflationary expectations, liquidity 
preference, market imperfections in an economy etc.
Banks are given the primary responsibility of financial intermediation in order to 
make fund available for economic agents. Banks as financial intermediaries 
move fund. Surplus sector/units of the economy to deficit sector/units by accepting deposits and channeling them into lending activities. The extent to 
which this could be done depend upon the rate of interest and level of 
development of financial sector as well as the saving habit of the people in the 
country.
Hence, the availability of investible funds is therefore regarded as a necessary 
starting part for all investment in the economy which will eventually translate to 
economic growth and development (Uremadu, 2006).
Many researchers have done a lot of study on the impact of interest rate on 
investment. In Nigeria, Ologu (1992) in a study of "The Impart of CBN Money 
Policy on aggregate investment behavior". Found out only few of the variables 
were significant at both the 95% and 90% confidence limits in explaining the 
behavior of investment during the (1976-90) period of student". Specifically, he 
found out that:
1. Contrary to expectation and to change's stock adjustment hypothesis, the 
existing stock of capital goods (plants and machinery) was not a major 
determinant of investment behavior of forms in Nigeria.
2. Interest rate was significant in influencing investment decision nothing 
that" this is not surprising since in a situation of limited residual funds as in 
Nigeria, the cost of capital should exert significant influence on both the 
frequency and volume of demand for invisibles funds by investors.

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