ANALYSIS OF THE INFLUENCE OF INTEREST RATE ON MONEY SUPPLY AND INVESTMENT IN NIGERIA: A VECTOR ERROR CORRECTION MODEL (VECM) APPROACH

The research analyzed the influence of interest rate on money supply and investment in Nigeria. It specifically analyzed the influence of working capital, return on investment, earning per share and gross operating profit on interest rate in Nigeria. Data was extracted from the Annual financial report of a manufacturing company using both descriptive research method and covariance while Autoregressive Distributed Lag Model (ARDL) and Vector Error Correction Model (VECM) were used to analyze the relationship which exist among the variables. The result of the findings showed that there is cointegration which implies aa long run relationship among the variables. The result revealed that Earning Per Share (EPS) had no significant impact on interest rate manufacturing firms in Nigeria. Furthermore, the result depicted that gross operating profit has a significant and positive impact on interest rate of manufacturing firms in Nigeria. The research recommends that financial managers increase their money supply and ensure that it is properly managed in order to enhance their investment, thus strengthening firm profitability. Furthermore, we suggest that financial managers should increase investment in working capital to accelerate their productivity so that they can also improve the profitability of the firms.