Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) DOI: 10.7176/JESD Vol.10, No.12, 2019 1 Deregulation of Interest: Implication for National Development * ERAVWOKE KESTER ERHIEYOVWE (Ph.D) AND ** ESHENAKE JIMOH SAMUEL * College of Education, Mosogar ** College of Education, Warri Abstract This paper investigates the deregulation of interest and its implication to national development in Nigeria. Utilizing annual time series data from 1970 to 2018, the study applied augmented dickey fuller unit root test. Overall, our results show that money supply have very strong influence on deregulation in the Nigerian economy. The result equally showed that interest rate, exchange rate, money supply and availability of credit are significant first difference. Thus, the paper submits that deregulation of interest rate has positive impact on exchange rate in Nigeria and recommends among others that efforts should be geared towards maintaining deregulation of interest rate, measure to enhance exchange rate and encourage savings should be maintained with a view to removing all impediments to free flow of businesses in the country. Keywords: Deregulation, Interest rate, economic development, exchange rate DOI: 10.7176/JESD/10-12-01 Publication date:June 30 th 2019 Introduction Interest rate is relevant in equilibrating influence on supply and demand in the financial sector in an economy. Colander 2001 and Ojo 1993 have confirmed this by saying that the channeling of savings into financial assets and the willingness of individuals to incur financial liabilities is strongly influenced by interest rates on those financial assets and liabilities. Interest rate has a developmental role of interlocking linkages between the real and financial sectors of most economies. The rate of Interest is a major instrument of monetary policy in Nigeria; interest rate plays a major role in the mobilization of financial resources with the aim of promoting economic development and growth through investment. The rate of interest plays positive relationship between investment and economic development if well established; it therefore becomes imperative that for any economy that wishes to grow should pay proper attention to variation of the rate of interest. Nigeria as a developing economy craving for economic growth and development cannot overlook the importance of interest rate in this direction. The Nigerian economy had a lot of structural distortions in the early 1980’s that almost led to stagnations of key productive sectors in the economy. The economy policies pursued in Nigeria prior to1985 made the economy vulnerable to external shocks. Consequently, budgetary allocation of 1986 sought to deemphasize controls and adopted policy aimed at expanding or increasing the economy resources base. The deregulation policy with its implied structural adjustment is the process by which government removes unnecessary control which tends to inhabit or prevent the effective and efficient program of economic and business activities in developing countries