Impact of Interest Rate Deregulation on Performance of Quoted Manufacturing Firms in Nigeria.
ABSTRACT
Amongst the major economic reforms that were introduced in 1986 is the deregulation of interest rates in the Nigerian financial market.
The theoretical base for deregulation is largely attributable to the Keynesian investment theory. The overall aim of deregulating interest rates is to encourage savings mobilization and make it possible for adequate flow of financial resources to the productive sectors of the economy.
Undoubtedly, interest rate deregulation could have an impact on the manufacturing sector of the economy. With limited resources and the upsurge in foreign exchange demand, the trend has been an upward movement of interest rate which a deregulated interest regime has helped to escalate.
In the same context, the inefficiencies in government controls and regulation have introduced increased concerns about the government’s ability to manage deregulation to achieve positive results.
Thus, the effect of deregulation can be seen in the high borrowing costs which have negatively affected profitability of businesses coupled with inadequate working capital and low shareholders’ fund. It is in line with the above that this study sought to:
(i) examine the impact of interest rate deregulation onprofit before tax of quoted manufacturing firms, (ii) determine the impact of interest rate deregulation on net working capital of quoted manufacturing firms, and (iii) ascertain the impact of interest rate deregulation on shareholders’ fund of quoted manufacturing firms in Nigeria.
TABLE OF CONTENTS
Title page – i
Declaration- – ii
Approval page – iii
Dedication iv
Acknowledgements v
Abstract – vii
Table of Contents viii
List of Tables – xi
List of Figures – – xii
CHAPTER ONE: INTRODUCTION
- Background to the Study – – – – – – – 1
- Statement of the Problem – – – – – – – 2
- Objectives of the Study – – – – – – – 4
- Research Questions- – – – – – – – – 5
- Research Hypotheses- – – – – – – – – 5
- Scope of the Study – – – – – – – – 5
- Limitations of the Study – – – – – – – 6
- Significance of the Study – – – – – – – 6
References. – – – – – – – – – 7
CHAPTER TWO: REVIEW OF RELATED LITERATURE
- Conceptual Framework- – – – – – – – 9
- Concept of Interest Rate – – – – – – – 9
- Concept of Performance of Quoted Firms – – – – – 9
- Theoretical Review – – – – – – – – 10
- Theories of Interest Rate – – – – – – – 10
CHAPTER THREE:RESEARCH METHODOLOGY
- Research Design 57
- Nature and Sources of data – 57
- Model Specification – 57
- Explanatory Model Proxies – – – 59
- Techniques of Analysis – – 61
References – – 62
CHAPTER FOUR: PRESENTATION AND ANALYSES OF DATA
- Introduction – – 64
- Data Presentation – – 64
- Descriptive Statistics – – 66
- Test of Hypotheses – – 68
- Test of Hypothesis One – – 68
- Test of Hypothesis Two – – 70
- Test of Hypothesis Three – – 71
References – 74
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
- Introduction – – 75
- Summary of Findings – – – 75
5.3 Conclusion – – 76
- Recommendations – – – 76
- Suggestion for Further Research – – 77
Appendixes 79
Bibliography – 92
INTRODUCTION
Financial sector reform (FSR) became a major component of the structural adjustment programme in Nigeria with the deregulation of interest rates in August 1987. Today, one of the most regulated sectors in the Nigerian economy is unarguably the financial industry.
Akiri and Adofu (2007) opine that the banking industry owing to the nature of activities, role, and function it performs in the economy, is also one of the widely and heavily regulated sector in both developing and developed countries of the world.
As financial intermediary, banks help in channeling funds from surplus economic regions to the deficit one’s in order to facilitate business transaction and economic development in general.
Bearing in mind that funds are owned by other people (the investing public/depositor) the banking ethics demand that such funds should be efficiently and effectively managed in order to build and maintain the confidence of depositors/investors in the banking system
The government most often may think it is necessary to intervene in the operation of the banking system with the intention of correcting the short comings of the price fixing mechanism to ensure that what is commerciallyrational for an individual bank is approximately rational for all.
Socially, interest rate charged by banks could be regulated to encourage savings mobilization, ensure and foster adequate investment for rapid growth and development.
REFERENCES
Adam, C.S. (1995). Fiscal Adjustment, Financial Liberalization, and the dynamics of Inflation: Some Evidence from Zambia. World Development, 23(5), 735-750.
Adam, C.S., & Bevan, D.L. (1994). Financial Liberalization and Trade Expansion inZimbabwe, Report prepared for the World Bank trade expansion programme to Zimbabwe.
Adebiyi, M.A. & Babatope-Obasa, B. (2004). Institutional Framework, Interest Rate Policy and the Financing of the Nigerian Manufacturing sub-sector.A paper presented at the paper Forum, Lord Charles Hotel, Somerset West, South South Africa.
Akingunola, R.O., Adekunle, O.A, & Ojodu, H. (2012). Impact of Interest Rate on Capital Market Growth: A Case of Nigeria. Universal Journal of Management and Social Sciences,2(11).
Akiri, E.S. &Adofu, I. (2007). Interest rate deregulation and investment in Nigeria.Journal of Economics and Management Studies, 2(1)
Aryeety, E. H., Heltige, M. Nissante &Stee, W. (1997, May). Financial Market Fragmentation and Reforms In Ghana.The World Bank Economic Review, 1(2).
StudentsandScholarship Team.
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