An Empirical Analysis of Interest Rates and Manufacturing Sector Performance in Nigeria

Abstract

This study seeks to investigate the impact of Interest Rate variations on the Nigeria's manufacturing sector performance. From the empirical analysis made using the Ordinary Least Square (OLS) and other properties established together with Error Correction Modelling, to know the relationship between Interest Rate, Foreign Exchange Rate, Capacity Utilization, Government Expenditure on Manufacturing Sector, Investment in Industrial production and Manufacturing Output in Nigeria within the period under review. All the variables were stationary at first difference and there also exists equilibra relationships between the dependent and the independent variables. All the explanatory variables appeared in their right signs according to apriori expectation given that Interest Rate (INTR) has a negative relationship with manufacturing Output (MANO).Government should formulate and implement more realizable monetary and fiscal policies that will aim in reducing interest rate on loans to the manufacturing sector.