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Abstract:
Several academics argue that a country's economic
performance, especially its economic growth, is determined by investment, which
in turn is influenced by interest rates. They argue further by saying that
interest rate management is one of the main monetary policy tools used by
decision-makers to guide and regulate an economy. Nigerian officials initiated
several initiatives aimed at stimulating private sector investment and
advancing economic growth. However, it is uncertain how impactful these
economic strategies are in achieving the desired outcomes. Therefore, this
study investigated the impact of interest rates, money supply growth, and
institutional quality on investment growth in Nigeria. The study utilised 68 quarters of time series data
(2006Q1 to 2022Q4) based on an ex-post facto research design. The
Autoregressive Distributed Lag (ARDL) model was utilized to assess the impact
of interest rates, money supply expansion, and institutional quality on the
growth of investment in Nigeria. The study found that interest rates have a long-run
significant co-integrating relationship with investment growth in Nigeria (Adj R2 = 0.811; F-stat (4,
63) = 98.323, p < 0.05). The study found that prime lending rate, monetary
policy rate, money supply growth, and institutional quality are significant
factors influencing changes in investment growth in Nigeria. The
study recommends that the monetary authority adopt interest rate levels that
would attract investment into the productive sectors of the economy and also
consider the appropriate channeling of money supply to important economic
sectors that require more liquidity support.
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