Analysis of the Impact of Interest Rate on the Net Assets of Multinational Business in Nigeria

Abstract

This study investigate the effect of macroeconomic variables on net assets of multinational companies operating in Nigeria with the aim of identifying how level of interest rate affect the net assets of these companies. Increased integration and growing macroeconomics fluctuations requires more attention to be paid to link between the noise that these fluctuations represent and the companies own development. For many reasons, management of these companies must weed out the effects of the noise so as to obtain a clear picture of long term sustainable profits, and thus a picture of how the company's intrinsic competitiveness is fostered. An understanding of the effect of the fluctuations also provides the basis for risk assessment. The net assets of multinational companies in Nigeria are affected either positively or negatively by a number of factors occurring within or without the economic system. This study examines the impact of interest rate (INT) on net assets of multinational companies to Nigeria from 1994 to 2010. net assets were represented by Net Assets Value Index in the model which is NAVI = a_o + a₁ INT + U. A regression model was designed to test the relationship between the net assets and interest rate as a macroeconomic factor. The regression analysis slowed that a reduction in interest rate results in increase net assets.  Government should therefore implement policies that will reduce interest rate and improve standard of living of its citizens through the encouragement of investment and enhance transactions in multinational companies business.