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This study captured the components of Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH-in-mean) framework; conditional variance (volatility), asymmetric effect and volatility persistence and interest rate in Nigeria. This is because ofthe usefulness of interest rates in measuring the financial conditions, also are major instrument of monetary policy and volatility being one of the most important concepts in finance. The study used real interest rate obtained from Central Bank of Nigeria and National Bureau of Statistic from 1970 to 2018 inclusive. The accommodating EGARCH-in-mean framework was employed in the estimation of the model. The following were found; conditional volatility is negatively and significantly related to interest rate. Also that interest rate volatility in Nigeria is not persistent. Again, there is existence of leverage effect, implying existence of asymmetric effect in the Nigerian financial market due to interest rate volatility. Consequently, the researchers suggest as follows; due to the presence of asymmetry effect, the Bankers’ Committee tightens their seat belt to forestall subsequent volatility in interest rate in Nigeria by consistently and regularly reviewing interest rate to accommodate the dynamism of the economy. Again adequate palliative measures be made available to enable investors continue with their economic activity in any business cycle in Nigeria.

Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework