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Research Article

Interest Rate, Exchange Rate and Private Domestic Investment in Nigeria: An Impact Analysis

Ishaku Rimamtanung Nyiputen*, Osang Paul Abijia and Onoyom, Margraret Onwanyi

Corresponding Author: Ishaku Rimamtanung Nyiputen, Department of Economics, Federal University Wukari, Taraba Nigeria.

Received: March 25, 2023 ;    Revised: May 08, 2023 ;    Accepted: May 11, 2023 ;   Available Online: August 10, 2023

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Everyone concerned about the development of Nigeria is alarmed by the uneven and declining domestic investment. In order to encourage economic growth, it is also crucial to understand and adequately assess a variety of other issues that influence domestic investment. This study looked at the effects of interest rates and exchange rates on domestic investments in Nigeria from 1981 to 2020. Data for the study were sourced from World Development Indicator, and hypotheses were developed to attempt to meet the objectives of version 2020. The ordinary least square's auto-regressive distribution lag was used to assess the objectives of this study. The theoretical framework is based on the monetary transmission mechanism. The variables were stationary at level I[0] and first difference I[1] according to the augmented dickey-Fuller (ADF) unit root test. Even when inflation is not taken into consideration, the variables still exhibit a long-term relationship, according to the ARDL f-bound test. According to the results, Nigeria's low exchange rate, would rising labor force, and reduced or low interest rates will encourage domestic investment. But neither infrastructure nor inflation significantly affect Nigerian domestic investment. The government should thus upgrade the infrastructure it offers, and the monetary authorities should set a fair interest rate and allow for naira depreciation.

Keywords: Interest rate, Exchange rate, Domestic investment

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