Analyzing the Link Between Interest Rate Management and Diversification in Nigeria

Abstract

This paper examined the linkages between interest rate management and economic diversification in Nigeria. The study used annualized data from 1986 to 2017 and the error correction model (ECM) was employed to analyse our respective models. Our findings showed that interest rate was positively but not significantly associated with agricultural sector performance in Nigeria. The positive effect in the Nigerian case is contrary to theoretical expectations. Moreover, interest rate was found to be negatively related to manufacturing sector performance in the economy. However, the negative impact of cost of fund was significant in Nigeria. We conclude that the biting influence of interest rate was stronger on the Nigerian manufacturing sector, we therefore recommend that Nigeria authorities should apply direct monetary policy measures of the monetary authority and government policy interventions to some selected products that can strengthen her foreign exchange earnings in the manufacturing sector. Nigeria in addition should build economic partnerships with emerging markets and also Government openness to foreign investment ought to be above average.