AUTHOR: EMEREONYEKWE, NGOZI GLORIA (MBA)
DEPARTMENT: Project Management
SCHOOL: School of Management Technology (SMAT)
AFFILIATION: Federal University of Technology Owerri
Prior to 1986, the rate of interest was administratively fixed at low levels with sectoral targets to encourage investment in the preferred sectors of Nigeria economy.With economic reform in 1986,interest rates were deregulated-allowing the market a greater role in rationing financial resources.This study investigated the relationship between interest rates and macroeconomic stability in Nigeria.It also tried to ascertain whether the market determined interest rates are favourable to economic development and stability in Nigeria. The following hypotheses were tested. i)There is no significant relationship between interest rate level and Gross domestic product(GDP) in Nigeria)Interest rate fluctuations are significantly related to exchange rate in Nigeria.iii)There is no significant relationship between interest rate and inflationary rate in Nigeria.The researcher used regression and correlation models to establish the empirical relationship between interest rates and other variables used in the analysis.the main finding were as follows:i). A significant and inverse relationship existed between interest rates and Gross Domestic Product(GDP).ii)An insignificant relationship was established between interest rate and exchange rate in Nigeria. iii)There is no significant relationship between interest rate and inflationary rate.From the finding,we conclude that a rise in interest rates is likely to have a negative impact on economic growth,development and stability in Nigeria,since there is a significant relationship between lower interest rate and economic stability.
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