INTEREST RATE AND MANUFACTURING SUB-SECTOR IN NIGERIA
EWUBARE, Dennis Brown & ZORKURU, Tombari Saalo Samuel
The study examined the impact of interest rate on manufacturing sub-sector in Nigeria.Annual time series on manufacturing sector output, interest rate and government capital expenditure covering the period between 1980 and 2014 were collected from CBN statistical bulletin. Also, the methods of cointegration and ECM were used for the analysis. The empirical results showed that all the variables were stationary and co-integrated using the ADF unit root test and Johansen co-integration test respectively. Based on the parsimonious ECM result, interest rate has negative impact on the manufacturing sub-sector in Nigeria. Also, the result showed that rising in the output of manufacturing sub-sector is a reflection of high government capital expenditure. The results conform to the Keynesian liquidity preference theory in the literature.Based on these findings, it is recommended that government monetary policy should target reducing the rate of interest to the manufacturing sub-sector in order to attain a viable manufacturing sub-sector. Also, government should redirect fiscal policy measures such as increase in government capital expenditure towards making Nigeria a producer nation through manufacturing sector which in turn would lead to economic growth and development.