FACTORS THAT REDUCE SAVINGS IN NIGERIA (1980-2010)

Code No: 633271

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ABSTRACT

This study investigates the core leading factors that reduce savings in Nigeria between 1980 -2010 using ordinary Least Square (OLS) econometric framework, which will enable us proffer solutions for the improvement of savings in the economy, which is also an important component for economic development in any country. Base on data collected, it is discovered that savings output in Nigeria during the period was unsatisfactory but was later discovered as a necessary factor for economic development and growth. This research shows the significance of savings which is achieved when saving habits is greatly considered by public private and government. The empirical results show a negative influence of trade openness (TDO) on aggregate savings. The work therefore submits that effort should be geared towards improving export capacity by improving productivity in industrial sector, which provide employment and increase per capital income as a bid to accelerate savings. And since interest rate signals a positive influence on savings in Nigeria, there should also be an intensified impact on real rates, spread and financial liberalization and or financial developing in Nigeria.

CHAPTER 1

CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Financial institution, market, regulator and instrument all comprises a set of complex and closely interconnected financial system, proving financial services in an economy, such services includes mobilization and allocation of resources, distribution of investment funds among firms, financial intermediation and foreign exchange transactions.
The Nigeria financial system can be categorized into two via: the formal or organized and informal or unorganized financial system, the banks and non banks financial institutions make up the organized financial system while the unorganized sector comprises of indigenous bankers local money lendersâ€Ÿ (ISUSU), shop-keepers or traders, merchants, landlords, saving associations, friends and relatives etc. the system is poorly developed, limited economics information, defective system of according are not integrated into the formal financial system, but very important to the Nigerian financial system. Capital formations, buying and selling of bonds and securities, creation of new assets and liabilities, executing monetary and credit policies of the central bank etc.
Are the roles and functions of financial system geared towards economic development of an economy? Patriotic researchers and policy makers have observed a declining savings rate in Nigeria over the past decades; this is due to the critical importance of saving for the maintenance of strong and sustainable growth in the world economy particularly in Nigeria.
A sound, healthy and reliable financial system relates to savings mobilization and efficient financial intermediation roles:
First, reduces hoarding and help spread the risk between household and firms.
Second, lowers interest rates thereby bringing about stability in capital market.
Third, they create liquidity in the economy by borrowing short-term and lending long-term.
Fourth, disseminate information between ultimate lenders and ultimate borrowers thereby mobilizing savings from surplus units and channeling them to deficit units through the help of financial techniques, instruments and institutions. Fifth the intermediaries promote development investment.
The Nigerian financial system comprise the regulatory /supervisory authorities, bank and non- bank financial institutions. As at the end of 2007, the system comprised of the Regulatory/ Supervisory authority, the Central Bank of Nigeria (CBN), the Nigerian Deposit Insurance Corporation (NDIC), the Securities and Exchange Commission (ESC), the national Insurance Comedienne (NAICOM), the National Pension Commission (NPC), and the Federal Mortgage Bank of Nigeria (FMBN).the CBN is the principal regulate and supervisor in the money market, consisting of a Deposit Money Banks (DMBs), Discount Houses, the Peoples Bank of Nigeria and Community Banks.