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. The real interest rate on bank deposits has a significant positive
impact, but the magnitude of the impact is modest. Also, it was found that the magnitude
of the impact and foreign Domestic investment actually contributed significantly to the
savings rate of Nigeria’s economy. Consumption on the other hand, did not have
significant impact on the savings rate of Nigerians during the period 1986-
2004Moreover, in the course of the study, it is noticed that public saving seems to crowd
out private saving but less than proportionately suggesting that public policy can
influence the national saving rate. Among the other variables considered, the spread of
banking facilities in the economy seem to have a positive impact on savings and with the
Foreign Domestic Investment as proxy for economic liberalisation having a wide impact
on the savings habit of Nigerians. We observed that there was a low trend rate of savings
during the SAP era as against the positive feedback in Post SAP era. How ever,
government should avoid drastic policy reversal but rather, it should concentrate efforts
in fine-tuning the existing policy measures which will not only compel prudence on the
part of the major operators in the financial market but also will stimulate savings
behaviour of all economic agents. This will go a long way at enhancing funds’
mobilization in the country.

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