The impact of Riba on economic growth

Abstract

The Nigerian economy faced numerous challenges which impacted the overall economic activity and has witnessed crises with devastating consequences on the world commodity prices as a result of global economics. This subsequently created structural imbalances occasioned by the collapse of oil prices, which adversely affected the Nation’s revenue. The Study examined the impact of interest rate of economic growth in Nigeria from 1990 to 2013.the main objectives of the study is to identify how riba effects on economic growth. Also the objective of the study to examine the how investment relates to the interest. In order to present empirical model, the study used the neo-classical growth model of Solow-Swan. Consider the economy production function represented by Cobb-Douglas. Adopted of modern testing methods like Unit root test, time serzzies and Diagnostic Tests. The study was used econometric approach to analysis time series data from1990 up to 2013.variables analysed include Gross domestic product, Interest rate, Investment, Inflation, change rate and small business. The result found that the interest rate has a slight impact on growth; however, the growth can be improved by lower the interest rate which will increase the investment. The study recommends that policy makers should set interest rate policies that will boost the economic growth. Therefore, proper measure should be taken in order to have a more rapid economic growth. The study established that there is a negative relationship between interest rate and the economic growth.