This study examines the effect of interest rate on investment determination in Nigeria. The study is necessitated by the fact that the behaviour of interest rates to a large extent determines investment activities and economic growth of any country. Investment decision is seen as demand for credit in an economy and this study calculated the annual variance of interest rate and its effects on investment determination. This research made use of OLS technique in estimating the model and also extracted data from the Central Bank of Nigeria (CBN) annual report and statistical bulletin of 2008. The research showed that interest rate played a negative role in investment determination in the economy. It also deduced that other variable such as economic stability, debt burden, shortage and lack of infrastructure, foreign exchange affect domestic investment. Improvement in these key macroeconomic variables is a necessary condition towards facilitating investment in Nigeria. This research work is above all a forward looking exercise intended to draw lessons for the strategic positioning of the economy as the government of Nigeria consolidates its transition to democracy.