The Determinant of Savings in A Deregulated Economy (The Nigerian Case).
Abstract
This paper examine the determinants of savings in a deregulated economy in the light of the Nigeria experience during the period 1986-1993 and 1994- 2004. That is during SAP and Post SAP era respectively.
The methodology involves the use of survey method for data collection and utilized simple and multiple Regressions for analysis.
These techniques were used to test the impact of the SAP policies on savings habit of Nigerians DURING and AFTER SAP era.
The study also utilized the correlation analyses to establish the extent and nature of relationship between the following: Real Per Capita Income and Savings; Investment and Saving;
Total Domestic credit, Real Interest Rate and Savings; and consumption and savings in a deregulated economy. Secondary data used were from official sources such as central Bank of Nigeria (CBN); Annual Reports, the CBN.
Statistical bulletin for various years and Nigeria Deposit Insurance Cooperation (NDIC).Meanwhile, it is found that the saving rate rises with both the level and the rate of growth of deposable income and the magnitude of the impact of the former is smaller than that of the latter.
Introduction
Background Of Study
Banks are statutorily vested with the primary responsibility of financial intermediation in order to make funds available to all economic agents.
The intermediation process involves moving funds from surplus sectors/units of the economy to deficit sectors/units (Uremadu, 2002;Nnanna, Englama and Odoko, 2004).
The extent to which this could be done depends on the level of development of the financial sector as well as the savings habit of the populace.
The availability of investible funds is therefore regarded as a necessary starting point for all investments in the economy which will eventually translate to economic growth and development (Uremadu, 2006).
In Nigeria, Nnanna, Englama and Odoko(2004) are of the view that the level of funds mobilisation by banks is quite low due to a number of reasons, ranging from low savings deposit rate to the poor banking habit or culture of the people.
According to them, another disincentive to funds mobilisation is the attitude of banks to small savers and this depends on the interest rate policy of the government.
Interest rate policy is among the emerging issues in current economic policy in Nigeria in view of the role it is expected to play in the deregulated economy in inducing savings, which can be channelled to investment and thereby increasing employment output and efficient financial resource utilization.
References
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Ajakaiye, D.O. (1996), “A compatible General Equilibrium Analysis of the effects of commercial Bank Lending Rates in Nigeria”,1987-91 in Obadan M.I. and Iyoha, M.I. (ed). Macroeconomic policy tools techniques and applications to Nigeria.
Ajewole, J.O. (1998), “Some evidence on Demand for money in Nigeria:
Ando ,A. and F. Modigliani (1957), “Tests of Life Cycle Hypothesis of Savings: Comments and Sugestions” Bulletin of the Oxford University Institute of Statistics, 19
Aneke, E.O. (1998), “Introduction to Academic Research Methods. Department of Banking and Finance”, UNEC. Go State Printing and publishing Co. Ltd.
Angtus, Deaton and Christiana, H.P. (2000), “Growth and saving among individuals and Households the Review of Economics and Statistics.
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