The Interest Rate Deregulation and Bank Lending in Nigeria

Abstract

This study examined the interest rate deregulation and bank lending in Nigeria within the period of 1987 to 2011. The study was carried out to show the relevance of the hinges on the fact that credit and its costs (interest) perform a private role in shaping the economic future of Nigeria. The ordinary least square (OLS) techniques were utilized to estimate the parameters of the modeled independent variables/regressors on our chosen dependent variable. The hypothesis that the interest rate deregulation has a significance impact on bank lending was tested and validated with the result. Our findings gave rise to statistically significant t-statistics, which confirms the effects of the independent variables on the dependent variables. Some of the recommendations to further accelerate growth of the banking sector are more efforts to recommend that government through central bank should implement stringent fiscal and monetary policies aimed at reducing inflation. Others include that banks have been over-reacting to interest measures by increasing the rates to unprofitable levels especially during the period of deregulation.

Keywords: Interest rate, deregulation, bank lending