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Abstract

This research focused on the effect of interest rate and inflation on investment in Nigeria. Empirical evidence suggested that there has been little attention linking interest rate, inflation rate and investment in contemporary economic literature especially using other varieties of interest rates such as prime lending rate and savings rate. This research formulated three objectives which include: to determine the relationship between prime lending rate and investment, ascertain the relationship between inflation rate and total investment; and investigate the extent to which savings rate affect total investment in Nigeria. Data were sourced from central bank of Nigeria statistical bulletin and analyzed using error correction model. The result revealed that there was a significantly negative relationship between prime lending rate and total investment, inflation rate decreased total investment significantly and that savings rate had positive effect on total investment in Nigeria but the positive effect was not statistically significant. The conclusion was that prime lending rate and inflation rate have been detrimental to investment in Nigeria and as a result, it was recommended that savings rate and prime lending rate should be maintained to a stable state in order to encourage investment outlay in Nigeria.
 Keywords: Inflation Rate, Interest Rate, Investment, Prime Lending Rate, Savings Rate.