ABSTRACT
This study examines the
determinants of savings in
proffer solution for the improvement of savings in the economy, since it is an
important component of the economic development of any country. On the basis of
available data, the study is of the view that savings output in Nigeria during
the period was generally unsatisfactory
and discouraging until of late when it was recognized as an important
ingredient for growth and development. It was discovered that real GDP
per-capita has the highest effect on financial savings in this research work.
The
findings of this research work shows that for savings to rise to a significant
level in the economy, incentives on savings should be grossly considered by the
public, private and government. Savings here refers to the deposit and
liabilities acquired by the organized financial institutions including bank and
non-bank financial intermediaries. Policy recommended included:
strengthening the legal framework of the
financial sector, creating and maintaining a stable macroeconomic environment
for savings and investment, development of
appropriate saving scheme, fostering the development of the money market
and the facilitation and establishment
of the financial institutions and their branches in the rural areas, as well as
the financial instruments and services they
offer.
TABLE OF CONTENTS
TITEL PAGE
………………………………………………………… i
APPROVAL PAGE
………………………………………………….. ii
DEDICATION
………………………………………………………..iii
ACKNOWLEDGMENT
………………………………………………iv
ABSTRACT
…….……………………………………………………..v
TABLE OF CONTENTS………………………………………………vi
CHAPTER
ONE
INTRODUCTION
1.1
Background of Study ……………………………………………1-8
1.2
Statement of Problems ………………………………………….
8-9
1.3
Aim of study …………………………………………………….10
1.4
Objectives of the Study
………………………………………….10
1.5
Statement of Hypothesis
…………….…………………………..10
1.6
Significance of the
study…………………………………………11
1.7
Scope and limitation of the
study………………………………...12
CHAPTER
TWO
LITERATURE
REVIEWS
2.1
Stylized evolution of savings in
2.2
Trend of savings in
…………………………………..20-29
2.3
Theoretical review and Evidence….………………………….29-37
2.4
Empirical review and Evidence ………………………………37-45
2.5
Factors influencing savings in
……………………….45-55
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.1 Model Specification
………………………………………….56-59
3.2 Method of
Evaluation ………………………………………. 59-64
3.3 Economic Apriori
Criteria……………………………………65
3.4 Data Required and
Source ……………………………………66
CHAPTER
FOUR
PRESENTATION
OF REGRESSION RESULTS
4.1 ADF Test for
Stationary …………………………………………67-70
4.2 Co integration test
……………………………………………….70-71
4.3 Presentation of
model results ……………………………………72-73
4.4 Economic
interpretation of results ………………………………73-75
4.5 Statistical
Criteria for Evaluation of Result (R2)…………………76-78
4.6 Econometric
criterion (Second order test) ………………………79-83
4.7 Evaluation of the
hypothesis …………………………………….83-84
CHAPTER
FIVE
SUMMARY,
RECOMMENDATIONS AND CONCLUSION
5.1 Summary of Findings
……………………………………………85-86
5.2 Policy
Recommendations ………………………………...............87-88
5.3 Conclusion
……………………………………………………….88-89
Bibliography
…………………………………………………………90-94
Appendixes
……………………………………………
CHAPTER ONE
1.0
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
The
financial system is a collection of various institutions, markets, instruments
and operators that interact within an economy to provide financial services.
The services provided include resource mobilization and allocation, financial
intermediation and foreign exchange transactions. The
financial system can be categorized into two viz; the formal or organized and
informal or unorganized financial system. The informal sector comprises of
local money lenders (ESUSU), the thrifts and savings associations etc. it is
poorly developed, limited in readiness and not integrated into the formal
financial system, but plays a major roles in the Nigerian financial system.
While the formal financial system on the other hand can be further categorized
into capital and money market institutions and these comprise of the banks and
non-banks financial institutions.
The crucial role played by the
financial system in the economic development of an economy was recognized by
Goldsmith (1955), Cameron (1967), McKinnon (1973) and Shaw (1973), they
demonstrated that the financial sector could be a catalyst of economic growth
if it is well developed and healthy. Over the past decades, the declining trends
in saving rates in
have been of great concern to policy makers and researchers. This is due to the
critical importance of savings for the maintenance of strong and sustainable
growth in the world economy particularly in
Statistics around the globe have shown
that savings rates have doubled in
and stagnated in sub Saharan Africa,
and the
Jerven, 2000). The benefits accruable from a healthy and developed financial
system relate to savings mobilization
and efficient financial intermediation roles (Gibson and Tsaka lobos,
1994), First, through the financial intermediation functions of financial
institutions, savers and borrowers are linked up and this reduces transactions
and search costs. Second, they create liquidity in the economy by borrowing
short-term and lending long-term. Third, they reduce information costs, provide
risk management services and reduce risks involved in financial transactions.
Fourth, the intermediaries bring the benefits of assets diversification to the
economy. Fifth, they mobilize savings from atomized individuals for investment,
thereby solving the problem of indivisibility in financial transactions.
The Nigerian financial system
comprises the regulatory/supervisory authorities, bank and non-bank financial
institutions. As at end -2007, the system comprised of the Regulatory/
Supervisory authority, the central Bank of
Insurance Corporation (NDIC), the Securities and Exchange Commission (SEC), the
National Insurance Commission (NAICOM), the National Pension Commission (NPC),
and the Federal Mortgage Bank of Nigeria (FMBN). The CBN is the principal
regulator and supervisor in the money market, consisting of Deposit Money Banks
(DMBs), Discount Houses, the People Bank of
CBN exclusively regulates the activities of Finance Companies and promotes the
establishment of specialized or development financial institutions. The SEC is
the apex regulatory/ supervisory authority in the capital market. The Nigerian
Stock Exchange (NSE) is a self-regulatory or user- regulatory institution. The
Issuing Houses, Registrars and stock brokers, who also interact with the money
market, complete the chain in the capital. The Federal Ministry of Finance,
together with the CBN constitutes the monetary authorities and share control
over Bureau de change. The NAICOM is the regulatory authority in the insurance
industry, while the FMBN regulates mortgage finance activities in
are also 24 deposit money banks (DMBs), 750 community banks, 112 finance
companies, 703 Bureau –de-change, 1 stock exchange, 1 commodity exchange, 93
primary mortgage institutions, 5 development finance institutions, 77 insurance
companies, 709 microfinance banks, and
581 registered insurance brokers. (CBN Annual Report and statement of Accounts,
2007).
Savings refers to the deposit and
saving abilities acquired by the organized financial institutions including
bank and non-bank financial intermediaries or it is described as a financial assets
accumulated by the public – both government and private agents in the organized
financial channels. These financial assets include savings and time deposits in
the banking institutions, provident funds, insurance premium, stocks and bonds etc.
as was stated earlier on. The intermediation process involves moving funds from
surplus sectors/ units of the economy to deficit sectors/ Units (Uremadu, 2002,
Odoko, Nnanna and Englama, 2004). The expansion of financial savings involves shifting
of funds from the personal and household sector to the business or corporate
sector which in turn, leads to greater investment, employment and income
growth. The extent to which this could be done depends on the level of
development of the financial sector mentioned above 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, Odoko and Englama (2004) are of the view that the
level of funds mobilization by financial institutions is quite low due to a
number of reasons, ranging from low savings deposits rates of the poor banking
habit or culture of the people. According to them, another disincentive to
funds mobilization is the attitudes of banks to small savers.
Theoretically, nothing stops economies
that are faced with different preferences, income streams and demographic
characteristics from choosing different saving rates. In practice however, the
inter-temporal choices that underlie saving depends on an array of market
failures, externalities and policy-induced distortions that are likely to drive
savings away from social levels. Development economists have been concerned for
decades about the crucial role of domestic saving mobilization in the sustenance
and reinforcement of the saving-investment-growth chain in Nigerian economy.
The relationship among saving, investment and growth has historically been very
close; hence, the unsatisfactory growth performance of several developing
countries. Example;
has been attributed to poor saving and investment. This poor growth performance
has generally led to a dramatic decline in investment. Domestic saving rates
have not fared better, thus worsening the already precarious balance of
payments position (Chete, 1999). In the same vein, attempts to correct external
imbalances by reducing aggregate demand have led to a further decline in investment
expenditure, thus aggravating the
problem of sluggish growth and declining savings and investment in the rates
(when and Villanueva, 1991).
Therefore,
as earlier said, the role of savings in the economic growth of any country
cannot be overemphasized. Conceptually, savings represents that part of income
not spent on current consumption; when applied to capital investment, savings
increase economic growth and output (Olusoji, 2003). Institutions in financial
sector like deposit money banks (DMBs)/ commercial banks mobilize savings
deposit on which they pay certain interest. To effectively mobilize savings in
an economy, the deposit rate must be relatively high and inflation rate
stabilized to ensure a high positive real interest rate, which motivates investors
to save from their disposable income. In
mobilizing savings and deposits has always been a major problem for economic
growth and development.
In
there is basically lack of inducement to savings which had adversely affected
savings. Some of these inducements or incentives include; poor banking habits,
attitudes of banks to small savers, poor orientation, unemployment, employment,
instability in the banking system, instability in the political system etc.
1.2 STATEMENT OF PROBLEM
In
Nigeria, the saving culture is very poor relative to other developing economies
(Uremadu, 2006) and that necessitates the need to put in place a coherent
economic policy that will be capable of providing the much needed enabling environment
and also there
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