Impact of Interest Rate Deregulation on Fund Mobilisation of Deposit Money Banks in Nigeria

The intermediation role of banks in harnessing idle funds is crucial to the sustenance of any economy and this is largely dependent on interest rates. This study examined the relationship between interest rate deregulation and fund mobilisation of Deposit Money Banks (DMBs) in Nigeria between 1986 – 2016. Autoregressive Distributed Lag (ARDL) Bound Test technique was used to determine short and long run impacts of interest rate deregulation on fund mobilsation of DMBs. The result showed that interest rate had insignificant impact, in the short run but significant impact in the long run. Also, money supply and inflation rate were the key drivers of fund mobilisation of DMBs in both short and long run situation. The non-significance of government expenditure affirmed that fund mobilisation of DMBs is of monetary and not fiscal policy phenomenon in Nigeria. It is, therefore, concluded that interest rate impacted on fund mobilisation in the long run and recommended that monetary authorities should concentrate towards reducing domestic inflation and increase money supply in order to improve fund mobilisation of DMBs in Nigeria.