CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND OF THE STUDY Interest is the reward that accrues to people who provide the fund with which capital goods are bought (Soyibo and Adekanye, 1992). Interest can also be defined as the payment made to a lender by a borrower for the use of a sum of money for certain period of time. The charging of interest on loan was initially abolished during medieval days, both was later legalized by King Henry VIII in 1545 when he abolished the usury laws in it was condemned. These usury laws were established during the medieval time when the payment of interest rate was strongly condemned and termed usury. During that time it was believed that loan was an aid to an individual or neighbour who is distressed, for such reason, they felt charging of interest on loan was not proper (Bhatia and Khatkhate, 1973). Interest rate deregulation was later introduced into the monetary system by Central Bank of Nigeria, which was part of the Structural Adjustment Program (SAP), which was introduced in July 1986 by the head of state then-Gen Ibrahim Babangida (Osofisan, 1993). Interest can also be said to be the charge assessed for the use of money. It can also be seen as “the payment made to owners of capital fund which they are ready to put at the disposal of others; thus, interest rate is like a price which bring into equilibrium the demand for resources to invest with the readiness to establish from present consumption. Interest rate is determined by the force of demand and supply of capital and for the condition that demand and supply of fund are equal. Hence, interest level is arrived at by the intersection between savings and investment (Luckett, 1984). Savings is defined as that portion of income after tax, which is not spent on consumption goods.