Determinants of Private Domestic Savings

Determinants of Private Domestic Savings

ABSTRACT

The study examined the determinants of private domestic savings in Nigeria from 1981 to 2015 using secondary data obtained from central bank of Nigeria statistical bulletin 2015 and ordinary least square estimation technique.

The empirical findings of the study provided evidence that in the long run, real interest rate (RINR), financial deepening (M₂GDP), Gross domestic product per capita (GDPPC).

Population growth (POP) is the major determinants of savings in Nigeria since they all exerted significant effects on private domestic saving.

In short run however, M2GDP was the found to be the only major determinant of private domestic savings in Nigeria.

The study therefore recommended that if the federal government wants to improve the level of private domestic savings in Nigeria, they should pay close attention to the above determinants as they significantly influenced the level of private domestic savings.

INTRODUCTION

Capital formation is an important factor of an economy growth. For a country like Nigeria to attain economic growth, serious effort should be geared towards capital formation by encouraging savings.

The financial institution markets, regulators and instrument interact within an economy to provide financial services such as foreign exchange transaction, financial intermediation and resources mobilization and allocation.

Savings mobilization and management is at the core of financial intermediation. In Nigeria, formal banking activities began in 1894 with the establishment of a branch of a foreign bank.

The developments since then have resulted in extensive network of bank branches in various locations in the country, with most of them concentrated in the urban centers, as in other developing countries.

The post office savings outlets that were inherited from the colonial era could not be efficiently operated to meet the aspirations of the population.

In addressing this problem, Central Bank of Nigeria initiated a number of policy actions to encourage growth in domestic savings, especially among the rural and the urban poor.

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