Dilemma Between Deposit And Lending Rate: Savings-Investment Perspective

The dilemma between deposit and lending rate has created challenges for financial institutions in the course of intermediation. This dilemma also made it difficult for investors to make accurate decisions which has created a lacuna in the financial system. The objective of this study is to investigate the source of the dilemma between deposit and lending rate. The study also examined the impact of deposit and lending rate on saving and investment respectively in Nigeria using the Auto-Regressive Distributed Lag (ARDL) approach. The empirical result revealed the main cause of the dilemma to be the fluctuation in the deposit and lending rate. The ARDL result shows that the deposit rate has a positive impact on savings while the lending rate has a negative impact on investment in Nigeria. The monetary authority should endeavor to maintain stability of the interest rate due to the significant impact of these rates on saving, investment and economic growth at large.