LENDING RATES AND GROWTH RELATIONSHIP IN NIGERIA: THE ROLE OF STRUCTURAL BREAKS

Abstract

The paper examines the dynamics between lending rates and economic growth in Nigeria, especially by accounting for the role of structural breaks in defining the true relationship between both variables. It utilised the Autoregressive Distributed Lag (ARDL)  technique to ascertain the nature of the relationship. With the aid of quarterly data spanning 2010Q1 to 2022Q4, the paper found that among others, in both the long- and short-run, the lending rate had a positive relationship with economic growth. However, when structural breaks, represented by 2020Q2 (when the economy was locked down due to the COVID-19 pandemic) was accounted for, the relationship became negative. The paper therefore concluded that accounting for structural breaks matters for the relationship, especially in the short run.