Interest Rate and Growth Nexus in Nigeria: The ARDL-Bound Test Approach

Adekunle, Oludayo Elijah; Adodo, Feyisayo Loveth; Akindutire, Tonia

doi:10.2139/ssrn.3415060

Cited by 3 publications

(3 citation statements)

References 4 publications

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“…The outcome revealed a positive association among market capitalization and interest rate. Adekunle et al (2018) examined economic growth and interest rate nexus in Nigeria between 1981 and 2016. Interest rate was used as a predictor while GDP was used as predicted variable.…”

Section: Theory Intuition and Expected Signsmentioning

confidence: 99%

Stock Market Capitalisation, Banks’ Lending and Deposit Interest Rate in Relation to Financial Liberalisation Theory in Nigeria (1985-2021)

Olusegun¹,

Efuntade²

2022

IJBFR

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The paper examines the impact of deposit rates on savings, lending rates on credits and market capitalization of Nigerian Exchange group limited from 1985 to 2021, using co-integration and vector error correction approach. The specific objectives were to estimate the short-and long-run association as well as the error correction mechanism of lending interest rate and deposit interest rate and stock market capitalization in Nigeria. The outcome of the exercise validated the hypothesis of financial liberalisation theory that deposit rates on savings, lending rates on credits on market capitalization of Nigerian Exchange group limited. Deposit interest rate and lending interest rate have significant explanatory power for stock market capitalization, which is consistent with our expectations in line with financial liberalization theory in Nigeria. The regulatory body should mandate banks to channel their mobilised savings to investors in form of loans at reasonable interest rate. Hence, the pointer should be to identify those constraints and bottlenecks that are making it difficult for banks to make loans available to investors. The issue of high interest rate with hidden transaction costs must be vigorously addressed by the monetary authorities; Monetary authorities should pursue policies that will encourage the saving culture of the people. This could be done by increasing the deposit rate which would lure people to deposit their money in banks thereby increasing the supply of loanable funds. This would lead to a fall in interest rate and eventually rise in investment in stock market development.

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Section: Theory Intuition and Expected Signsmentioning

confidence: 99%

Stock Market Capitalisation, Banks’ Lending and Deposit Interest Rate in Relation to Financial Liberalisation Theory in Nigeria (1985-2021)

Olusegun¹,

Efuntade²

2022

IJBFR

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“…The outcome revealed a positive association among market capitalization and interest rate. Adekunle, Adodo, and Akindutire (2018) examined economic growth and interest rate nexus in Nigeria between 1981 and 2016. Interest rate was used as a predictor while GDP was used as predicted variable.…”

Section: Conceptual Framework Of the Researchmentioning

confidence: 99%

Assessing Literatures on the Dependence of Stock Market Development on Upstream Oil Royalty Revenue and Systematic Risk Factors: Highlighting the Relevance of Dutch Disease Theory and Capital Asset Pricing Model

Efuntade¹,

Olusegun²

2022

IJSSMR

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The paper assessed past literatures on the dependence of stock market financial development on upstream oil royalty revenue account and systematic risk factors and evaluating the relevance of Dutch Disease theory and capital asset pricing model. Theoretical approach supports the role of oil royalty revenue vis-à-vis oil price volatility, foreign exchange rate risk, financial liquidity risk and interest rate risk in determining the performance and financial development of stock market. It is well documented in research that stock prices react to information on oil revenue, crude oil production, monetary policy interest rate, foreign exchange rate uncertainty and diaspora cash remittances. Traditional valuation of stock is based on capital asset pricing model but the modern relevance is in doubt due to anomalous performance of investors and behavioural sentiments. Stock markets of emerging economies over the past few decades have witnessed remarkable growth as indicated by the value and volume of trade in the markets along with the level of capital inflows from developed markets, thereby providing numerous opportunities for investments. The development of the stock market is vital as it provides more opportunities for greater mobilization of funds from with and diaspora remittances and better efficiency in resource allocation. Nevertheless, investment returns in the stock market of developing economies continue to be more reactive to changes in economic fundamentals due to their fragile and volatile nature. This makes them even more unpredictable and unstable unlike the stock markets of developed economies, which are known to be more stable. Stock market financial development is not symptomatic of Dutch Diseases based on the fact that Oil-induced Dutch Disease assumes an oil sector which largely contributes to the economy while so many vital systematic risk factors affects stock market development. Optimistically this study along with other previous and future studies will increase the knowledge about Dutch Disease and will contribute to lessen the harmful effects that Dutch Disease causes. In spite of the common perception that oil is extremely important for financial and economic dynamics, there is, unexpectedly, a dearth of research on how oil revenue and prices influence stock market financial development.

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“…Most of the studies (Adekunle et al, 2018;Azeez & Obalade, 2019;Demir, 2019;Etale & Tabowei, 2019;Farooq et al, 2016) came out with outcome that interest rate had a negative link with market capitalization, while studies such as Khrawish et al (2016); Edirin and Ekwueme (2015); Priscilla and Ezeanyeji (2019) showed a positive association between interest rate and market capitalization. Existing studies focused on interest rate and stock market development, to the best of our length of research on this subject, no study has find out the link among savings deposit rate and market capitalization.…”

Section: Literature Reviewmentioning

confidence: 99%

Effect of Savings Deposit Rate on Stock Market Capitalization in Nigeria: An Empirical Investigation

Eze

Johnny

2020

International Journal of Business, Economics and Management

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This research plan is prepared to find out the impact of savings deposit rate on security market capitalization in Nigeria. The inquiry plan employed monthly data between January 2016 and December 2019. The data were collected from the publications of the National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN). Variables on which data were sourced are stock market capitalization (MCAP), savings deposit rate (SDR) and bank lending rate (BLR) as a control variable. The data analysis was done via descriptive tools, Johansen cointegration test, ADF test of unit root and regression procedure. The investigation discovered a significant inverse association among savings deposit rate and security market capitalization. The research also discovered insignificant negative link between bank lending rate and stock market capitalization in Nigeria. The overall equation judging from the R2, Durbin-Watson statistics and Fstatistics is significant. It is thus recommended that, at anytime the country intend to raise the level of stock market capitalization, government should formulate and implement policies to reduce savings deposit rate in Nigeria. Government should also implement policies to reduce bank lending rate to boast economic growth and as well raise the level of stock market capitalization in Nigeria.Contribution/Originality: This study is one of very few studies which have investigated the effect of savings deposit rate on stock market capitalization in Nigeria. This study contributes in the existing literature is to be a reference for further researchers who want to deepen or re-examine the effect of savings deposit rate on stock market capitalization.

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Interest Rate and Growth Nexus in Nigeria: The ARDL-Bound Test Approach

Cited by 3 publications

References 4 publications

Stock Market Capitalisation, Banks’ Lending and Deposit Interest Rate in Relation to Financial Liberalisation Theory in Nigeria (1985-2021)

Stock Market Capitalisation, Banks’ Lending and Deposit Interest Rate in Relation to Financial Liberalisation Theory in Nigeria (1985-2021)

Assessing Literatures on the Dependence of Stock Market Development on Upstream Oil Royalty Revenue and Systematic Risk Factors: Highlighting the Relevance of Dutch Disease Theory and Capital Asset Pricing Model

Effect of Savings Deposit Rate on Stock Market Capitalization in Nigeria: An Empirical Investigation

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