Short-Run Macroeconomic Effects of Bank Lending Rates in Nigeria, 1987-91: A Computable General Equilibrium Analysis

"This study attempted to assess the short-run macroeconomic impacts of the rising bank lending rate profile of the period between 1987, when the monetary authorities started liberalizing the financial sector, and 1991. The justification for the study is the observed instability in the interest rates policy as the authorities seem to be responding to the demands of the most vigorous and/or influential complainants. If this situation continues, there will be considerable uncertainty, which may jeopardize appropriate responses by the relevant economic agents. Consequently, the much desired smooth and orderly development of the national economy in which the private sector will be predominant may be jeopardized. In order to assist in preventing this situation, a computable general equilibrium model useful in simulating the short-run macroeconomic impacts of bank lending rates has been developed. The model was specified so as to capture the confounding influence of exchange rate movements on the impacts of bank lending rate in order to reflect the import dependent feature of the existing production structures in Nigeria."