IMPACT OF INTEREST RATE DEREGULATION ON ECONOMIC GROWTH

ABSTRACT This study investigates the impact of interest rate deregulation on economic growth in Nigeria, with a particular focus on gross domestic product (Nigerian economic growth) and the broader implications for income distribution and poverty alleviation between 1986 and 2024. The study anchored within the context of the Structural Adjustment Program (SAP), which initiated financial liberalization in Nigeria, the study employs a quantitative research design using secondary time series data sourced from the Central Bank of Nigeria, National Bureau of Statistics, and the World Bank. Key econometric techniques including Ordinary Least Squares (OLS) regression, Augmented Dickey-Fuller (ADF) unit root tests, and Johansen cointegration analysis were employed to estimate both short- and long-run relationships. The findings reveal that deregulated interest rates have negatively impacted the credit access due to elevated borrowing costs, while financial sector depth positively influenced GDP, indicating improved economic inclusion when credit access is enhanced. Inflation was shown to exert a negative and significant effect on income growth, underscoring the destabilizing effects of unregulated financial environments on poverty and income distribution. The study concludes that while interest rate deregulation has the potential to promote financial efficiency, its practical outcomes in Nigeria are undermined by weak institutional frameworks and macroeconomic instability. The study recommends a more balanced approach combining market-based interest rate policies with targeted credit interventions and robust macroeconomic management to ensure inclusive and sustainable economic development.