Interest Rate Spread and the Nigerian Economy
Abstract The study examines the relationship between the interest rate spread and the Gross Domestic Product Growth Rate (GDPGR) in the Nigerian economy. It delves into how fluctuations in the interest rate spread can influence economic activities, with a particular focus on GDP growth. An ex-post facto research design is employed, wing time series data sourced from the Central Bank of Nigeria (CPN) statistical bulletin. The study employs the GARCH analysis to explore the data, making it one of the few studies that apply this sophisticated econometric tool to analyze the Nigerian economy. The study found a statistically significant positive relationship between interest rate spreads and the GDP growth rate. Specifically, 1% increase in the interest rate spread leads to a 0.30% increase in the GDP growth rate. Moreover, significant volatility clustering was observed in the GDP growth rate, highlighting the need for nuanced economic planning and risk management. Given the deserved positive impact of interest rate spread on GDP growth rate, policymakers should consider interventions that can widen the interest rate spread without causing undue inflationary pressure. This can include lowering the policy rate or providing tax incentives for savings to encourage mare deposits
Keywords: Financial markets, Gross domestic product growth rate, Interest rate spread, Monetary policy.
Citation: , & Keremah, S.C. (2024). Interest Rate Spread and the Nigerian Economy. International Journal of Innovative Research in Accounting and Sustainability, 9(4), 89-100.