Interest Rate and Manufacturing Sector Performance; Further Evidence from Nigeria

INTEREST RATE AND MANUFACTURING SECTOR PERFORMANCE; FURTHER EVIDENCE FROM NIGERIA

Rivers State Universal Basic Education Board, Port Harcourt, Nigeria

Department of Economics, Faculty of Social Science, Rivers State University, Port Harcourt, Nigeria

Department of Accounting, Faculty of Business Studies, Ignatius Ajuru University of Education, Port Harcourt, Nigeria

ABSTRACT

The study assessed the effect of interest rate on manufacturing sector performance in Nigeria between 1981 and 2019. Time series data on manufacturing production, lending rate, savings deposit rate, exchange rate, manufacturing capacity utilization rate and commercial banks loans & advances were sourced secondarily. The analysis started with the descriptive statistics of the series and proceeded to the examination of the stochastic characteristics of each time series by testing their stationarity status using Augmented Dickey-Fuller test and then the error correction technique of model estimation. The study found that lending rate negatively affected manufacturing sector output while commercial banks loans and advances did not meaningfully improve manufacturing sector production. It is therefore recommended that, government through the Central Bank of Nigeria should pursue policies that moderate lending rate and increase loans and advances to the manufacturing sector to boast the production and maximize output in that sector.

Keywords: Interest Rate, Manufacturing, Co-integration, Error Correction Mechanism.

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Nnamaka, U.C; Odungweru, K. & Nwanyanwu, K.U (2022). Interest Rate and Manufacturing Sector Performance; Further Evidence from Nigeria. Research Journal of Management Practice, 2(1), pp29-44. Available online at: https://www.ijaar.org/articles/rjmp/v2n1/rjmp-2vn1-Jan22-p11211.pdf.

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