CHAPTER
ONE
INTRODUCTION
1.1 Background of the Study
As capital formation through savings mobilization, is an
important factor in economic growth, countries that are able to accumulate high
level of capital, tend to achieve faster rates of economic growth and
development (Utemadu, 2002). Therefore, to finance adequate investment required for
proper economic growth, every economy needs to generate sufficient savings or
borrow from a broad. However, borrowing from abroad is not a proper strategy
for economic growth and development, as it may not only have adverse effects on
the balance of payment as these loans will have to be serviced in the future,
but also carries a foreign exchange risk. Thus, domestic savings become
necessary for economic growth because, they can provide the domestic resources
that are needed to fund the investment effort of a country without
flip side.
Vividly, savings represents that part of income that is
not spent on current consumption, but when applied to capital investment, output
increases (Olusoji, 2003). This out put is increased by introducing new
innovations in form of technology, which leads to a faster economic growth and
development by creating the possibility of investing in a new plant, that
increases the productivity of the economy.
Again, financial intermediation is an important activity
that helps to promote a more efficient and dynamic economy, by allowing the
fund to be channelled from people who might not otherwise, invest in productive
use, to people that will invest in productive ventures. However, the extent to
which this could be done, depends on two factors;
1. The level of development of the financial sector.
2. The savings habit of the populace.
Therefore, banks are statutory
vested with the responsibility of financial intermediation, in order to make
funds available to all the economic agents. The intermediation process involves
moving funds from surplus economic units of the economy to deficit economic
units (Utemadu 2003).
1.2 Statement of the Problem
The growth rate of Nigerian
economy remains a challenging issue. It is because, domestic savings which
serves as a tool for capital mobilization towards financing aggregate
investment, needed for economic growth, is very low. That is, rate of increment
in savings mobilization, does not synchronize with the developmental challenges,
encountered in economic growth, and this factor, mitigate against the growth of
economy (Nigerian economy).
Infact, low level of savings and high interest rate have
been identified and highly conjectured to contribute to the declining level of
investment that will promote growth in Nigeria, and other less developed
countries (LDCs) in general.
Thus, having observe the above impediments the need is
felt to research on the impact of private domestic savings on Nigerian economy.
1.3 Objectives of the Study
The general objective of this
study; is to examine the impact of private domestic savings on Nigeria’s
economic growth.
The specific objectives include:
i. To examine the magnitude and
determinants of private domestic savings in Nigeria.
ii. To determine the effectiveness of
private domestic savings on Nigerian economy
iii. To identify a more pragmatic strategy of
mobilizing capital in Nigeria.
1.4 Research Hypothesis
The impact of private domestic
savings on Nigeria’s economy.
Ho: Private domestic savings
have no significant effect on the economic growth in Nigeria.
H1: Private domestic savings
have a significant effect on the economic growth in Nigeria.
1.5 Significance of the Study
This research is
structured;
To afford the
opportunity for society government as well as school administrators, to access
the viability of private domestic savings in Nigeria.
To act as a source
of information on various factors that can determine domestic savings.
To also guide
policy manners towards policy initiation.
To also help
students and researchers to do further work related to this research project.
1.6 Research Methodology
This research would employ regression analysis, that
could base on the classical linear regression model, otherwise known as
ordinary least square (OLS) technique. This technique is chosen because of its
computational simplicity and properties such as linearity, unbiasedness,
minimum variance and zero mean value of the random term.
1.7 Scope of the Study
This study covers the impact of
private domestic saving savings on Nigerian’s economy within the period of
1980-2009. This period is chosen based on the available data, which would help
us to determine the effectiveness of private domestic savings before and after
SAP.
1.8 Limitations of the Study
No research works especially one on a
serious academic fact finding that does not encounter a certain level of
stumbling blocks and stress. Hence, it is an arduous work. Therefore, research
work to fruition and acceptable academic work, encountered a seemingly
intractable and insurmountable constraints as itemized below:
Time
Constraint:- The time constraint
has shown no mercy to the researcher. The limited time has to be shared among
alternative uses, which includes; reading, attending lectures and writing this
research work, thereby making the researcher unable to reach most organisations
and sample study, related to her study, where useful materials could have been
collected, due to limited time available to her custody.
Financial
Constraint:- As a student in a developing Country, finance poses a lot of problem
towards achieving the desired result. Research writing is very expensive as it
entails many costs; which include: Mobility cost, cost of collecting data, and
other miscellaneous costs like cost of procuring relevant text books and other
recommended materials that are vital for the study.
1.9 Operational Definition of Research
Concepts
Social science concepts, have received an avalanche
definitions, and as such, no one definition has all it takes for universal
acceptability. Conversely, definitions are in line with authors conceptuality.
Therefore, the following concepts as defined below, are
relevant to the study.
Effects:
It
means the result or an outcome of something.
Savings:
It
is the income not spent on goods and services for current consumption.
Economic
Growth: It is the increase in Gross Domestic product (GDP); it is the monetary
value of all the economic activities produced within a given period usually one
year.
Capital
Formation: It is the accumulation of capital through savings mobilization.
Investment:
It
is the act of spending money on productive ventures.
Capital:
it
is the real assets like factories or equipment that can be used in production
of other goods Jhingan (2003).
Interest:
It
is the price paid for borrowed money (Onwukwe 2003)
REFERENCES
Jhingan M.L (2003), Macro
economic theory, 11th Edition Delhi press Onwukwe N. (2003),
Introduction to macro economic Theories – Enugu,
Linco press Nig. Ltd.
Olusoj M. U (2003);
Determinants of private savings in Nigeria NDIC Quarterly
Utemadu S. O (2002).
Introduction to finance Benin, M Index publishing
company
CHAPTER
TWO
LITERATURE
REVIEW
2.1
REVIEW OF RELATED LITERATURE
2.1.1 CONCEPT OF SAVINGS.
According to Olusoji (2003), savings represent that part
of income not spent on current consumption, but when applied to capital
investment, output increases.
Therefore, savings can simply be defined as the act of
abstaining from present or current consumption of wealth. It is also seen as
the allocation of resources between present and future consumption (Gills,
1996). According to Keynes (1936), the total income of an individual is partly
spent and partly saved. Thus, savings is income not spend on goods and services
for current consumption. It represents the difference between income and
consumption. Reason being that, income is either consumed or saved. That is
according to John Maynard Keynes (1936), savings is defined as the excess of
income over expenditure on consumption. This means that, savings is that part
of disposable income of the period, which has not passed into consumption. He equally
maintained that on the aggregate, the excess of income over consumption
(savings) cannot differ from addition to capital equipment (that is Gross Fixed
Capital Formation or Gross Domestic Investment). Therefore, savings is a mere
residual and the decision to invest between them, determine the volume of
national income accumulation in a period. In the Keynesian view, rising income
would result in higher savings rates. As a matter of fact, savings is regarded
as being complementary to the consumption function, when the autonomous
consumption expenditure is separated (Umoh, 2003).
Olusoji (2003) equally opined that institutions in the
financial sector like deposit money banks (DMBs) or commercial banks, mobilized
savings deposits on which they pay certain interest. To effectively mobilize
savings in an economy, the deposit rate must be relatively high and inflation rate
stabilize to ensure a high positive real interest rate, which motivates
investors to save from their disposable income. To Nkah (1997), savings is seen
as the amount of income per time that is not consumed by economic units.
Accordingly, Samuelson and Nordhans (1998) said that savings is income minus
consumption following from the above, savings can be made by individuals
(personal or private saving).or by corporate organisations such as firms
(corporate savings or retained savings). Personal savings is that part of
disposable income that is not consumed, while corporate saving is that part of
firms profit that is not distributed as dividends to shareholders. Therefore,
for a country, the total supply of available savings is simply the sum of
domestic savings and foreign savings.
2.1.2 TAXONOMY OF SAVINGS
As mentioned from above, the
total supply of available savings is simply the sum of domestic savings and
foreign savings. However domestic savings could be further broken into two
components, which include government or public sector savings and private
domestic savings.
Government savings originates from the surplus budgeting,
but very few countries make part of their public sector savings from savings or
profit of the government owned enterprises. There are also two aspects of
private domestic savings. These include corporate savings and household
savings. Again, foreign savings also come into two basic forms such as.
Official foreign savings or
foreign aid, and private foreign savings.
Therefore, the taxonomy of savings is stated as thus,
S=Sd+Sf
Where Sd=Sg+Sp and
Sf=Sfo+Sfp
Where
s= savings
sd= domestic savings
sf= foreign savings
sg= government savings
sp= private savings
sfo= official foreign savings
sfp= private foreign savings
2.1.3 Determinants of Savings
The classical Economists did the first theoretical
explanation of the determinants of savings and its importance. Smith (1776)
recognised the importance of savings when he observed that capital is increased
by parsimony and diminished by prodigality and misconduct. Prior to 1936, the
classical economists propounded their theory on the savings, and asserted that-a
negative relationship existed between savings and interest rate is the
equilibrating force between savings and investments, and the decision to save
or invest, depends solely on the rate of interest. Thus, at any particular
level of income, the amount saved will increase with any rise in the rate of
interest.
According to John
Maynard Keynes (1936), the major determinant of both country’s level of
consumption and savings, is that country’s national income. He therefore opined
that the higher the income, the high the level of consumption and savings. He
equally maintained that-even at the individual level, a person’s income
directly determines to a large extent his consumption and savings. This bloke
(Keynes, 1936), recognised this when he found a positive relationship between
consumption and person’s disposable income
That is, C = F (Yd) and S =
Y-C
Where
C = Consumption
Yd = disposable income
Y = consumer’s level of
income.
However, according to Macklinon (1973), savings is not
determined by income as postulated by Keynes (1936), but, it is determined by
real interest rate. In his analysis, he viewed low interest rate as a cause of
low savings, which means that firm business enterprises, are discouraged to
invest funds through the formal banking system. He equally admitted that-high
real interest rate is seen as a strengthening factor to both market institution
and the level of savings.
Similarly, Kaldor (1940);
using business cycle paradigm, corroborated with Keynes postulation that-income
is a major determinant of savings. He stated that savings is sensitive to
changes in income, both at relatively low and high levels. To him, in
recession, economic agents emasculate their normal standard of living. However, in the early stages of recovery,
economic agents increase their savings sharply to rest the previous level.
Again, Duesenbery (1949) in his past and relative income hypothesis, postulated
that savings is determined by previous savings rate. He elaborated on this by
adding that- there are adjustment lags in savings behaviour as the full
reaction of savers to changes in the environment does not happen at once, but occurs over time due to habit,
persistence, inertia, custom etc. But economic agents react slowly to changes
in income, in mals decision (Mwega,
1990).
In the view of Balassa (1993), low interest rate is
detrimental to increased saving mobilization, which can be utilized for
investment. To him, if the real rate of return of holding money is low, a
significant proportion of the physical capital of the economy will be embodied
in inventories of finished and semi-finished goods. He equally argued that
–financial liberalization brings forth a shift, from lower productivity
investment, intermediated by the financial sector. It can equally discourage
savings, especially if the saver targets a given level of future income
(Dornbush, 1990).
The existence of some inequality may spur savings among
middle class, because of the desire for prestige and status. Redistribution of
income tends to reduce the share of the rich in the national income, both
through fairer distribution of the benefits of economic expansion and also
through progressive taxation. As a result, the rich will have smaller income
out which they could save. All things being equal, this will reduce the amount
of investment and economy’s rate of expansion.
Infact, according to Anyanwu and Oaikhenan (1995), the
determinants of savings are classified into;
a. Objective determinants and
b. subjective determinants
According to them, the objective determinants are both
quantifiable and verifiable and include the following:
i. The level of income
ii. The rate of interest
iii. Inflation rate
iv. Expectation about the rate of inflation
v. Availability of saving facilities
The subjective factor that influence savings are non
quantifiable and largely psychological in nature and they include;
i. The instinct for precaution
ii. The desire for bequest
iii. Habits and cultural factors.
Savings could be contractual or discretionary. Contractual
savings is a situation where one is obliged to save a certain amount of his
income every month, for instance, pension life insurance etc. while
discretionary savings is all other kind of savings where one is not obliged to
save a specified amount.
2.1.4 Theoretical Literature
GROWTH
THEORY: ENDOGENOUS GROWTH THEORY
In economics, endogenous growth theory or new growth
theory was developed in the 1980s, as a response to criticism of the
neo-classical growth models. In the neoclassical growth models, the longrun
rate of growth is exogenously determined by either the savings rate (the
Harmod-Domar model), or the rate of technical progress (Solo model). This
growth theory states that Y = f (K,L), where Y represents the output, K is the
capital and L is the Labour. This implies that capital and labour are the
necessary factors of economic growth. However, the savings rate and rate of
technological progress remain unexplained.
In the endogenous growth theory, it holds that policy
measures can have an impact on the long-run growth rate of an economy. For
example, subsides on research and development or education, increase the growth
rate by increasing the incentive to innovate. Endogenous growth theory tries to
over come the short comings of neoclassical growth theory by building
macroeconomic models out of microeconomic foundations, and assuming constant
marginal product of capital at the aggregate level, or at least, that the limit
of the marginal product of capital, does not tend towards zero.
Infact, the main implication of endogenous growth theory
is that policies which embrace openness, competition, change and innovation,
will promote growth. Conversely, policies which have the effect of restricting
or slow change by protecting or favouring particular industries or firms, are
likely over times, to slow growth of the economy
2.2 Empirical Literature
The soundness of any theory whether economic or
otherwise, is tested by its behaviour when subjected to empirical analysis.
Several attempts have been made to empirically investigate the determinant and
impact of private domestic savings on the economy. These studies include; Mwega
(1990) attempted to ascertain the determinant of savings using the ordinary
least square technique of economic research, and he found out that-real
interest rate was an important determinant of savings in Kenya Soyibo (1994)
conducted a research on the determinants of savings in Nigeria by adopting the
descriptive statistical analysis approach. Using primary data, he measured the
effect of real interest rates as a mechanism for the transmission of savings to
investment.
Bloch and Tang (2003) in another study, used time series
data for country specific analysis and cross-sectional technique, to provide
for evidence for 75 countries, with the majority on developing countries with
emerging market economics. Using simple correlation coefficients between the ratio
of private credit to GDP, and GDP growth for individual countries, their
results show a lack of robustness.
Gelos and Werner (1999) used plant-level data from the
Mexican manufacturing sector. They found that-cash flow is significantly
correlated with investment before and after financial liberalization,
particularly for smaller firms.
2.2.1 Limitations
of the Previous Studies
There is no doubt that-there exists a plethora of
research works done on the aspect of domestic savings and financial sector.
However, non of the literature reviewed, critically and conclusively unravelled
the impact of private domestic savings on Nigerian economy. Therefore, having
reviewed both theoretical, the theoretical and empirical literature of
different authors in the same or related research work, certain areas that need
amendment have been noted. Attention will be given to constraints hamstringing
and limiting the extent, scope and volume of the previous work. For instance,
the inadequate of relevant statistical data, adumbrated in some of the
consulted literature, will be overcome either through proxy variable, or
through assembling splinters of data into a body of whole.
Again, the writer
is poised to incorporate in her works, appropriate explanatory variables where
such variables have not been included in the previous works, perhaps, as a
convenience or a matter of prevailing circumstances.
REFERENCES
Balassa B. (1993);
The effects of interest rates on savings in developing countries. World Bank
working papers.
Block Y and Tang S.K (2003):
The role of financial Development in Economic
growth. Progress in Development studies.
Dorn bush R. (1990): Economic
perform in Eastern Europe and soviet union
priorities and strategy Washington D C
Duesenbery J. (1949): Income,
savings, and the theory of consumer behaviour
Cambridge, M. A Harvard University press.
Gelos and Werner A.
(1999): financial Liberalization, credit constraints and collateral investment
in Mexican manufacturing sector IMF working paper series.
Gills M. (1996): personal
savings in Developing Nations: Journal of Economic
record, World Bank
Kaldo N. (1940) A Model of the
Trade Cycle. Economic Journal
Keynes J. M (1936): General
Theory of Employment, Investment and money
London Macmillan Company Ltd.
Macklinon R I (1973): Money
and Banking in Economic Development.
Washington D. C: the Brookings Institute.
Mwega F.M. (1990): Real
Interest Rates and the mobilizations of savings,
Africa Economic Research consortium papers.
Nkah O. (1997): Introductory
macro economics for Higher Education. Agulu,
Levrene Publisher
Nordhans K (1998): Financial
intermediation and variability. Journal of Development
in Economics
Olusoji M. O
(2003): “determinants of private savings in Nigeria” NDIC Quarterly.
Sayibo A (1994);
The savings-investment process of Nigeria. Empirical
study of the supply side; African Economic Research Consortium paper.
Smith A (1976): An Enquiry
into the Nature and causes of Wealth of nations.
University of Glasgows
Umoh O. J (2003): An Empirical
investigation of the Determinants of Aggregate
National savings in Nigeria, Journal of monetary and Economic in legrsation.
CHAPTER
THREE
3.0 RESEARCH METHODOLOGY
This chapter focuses on the research method that will be
adopted. Regression analysis based on the classical linear regression model,
otherwise, known as ordinary least square (OLS) technique is chosen by the
research. The researcher’s choice of this technique is based not only by its
computational simplicity, but also as a result of its optimal properties such
as linearity, unbiasedness, minimum variance, zero mean value of the random
terms etc (Gujarati; 2004)
3.1 MODEL SPECIFICATION
In this study, hypothesis has been stated with the view
of examining the impact of private domestic savings on Nigeria’s economics
growth. In capturing the study, these variables were used as proxy. Thus, the
model is presented in a functional form as shown below
GDP=f (TPS,PCY,ITR)……….3.1
Where
GDP = Real Gross Domestic
Product (dependent variable)
TPS = Total Private Savings (independent variable)
PCY = Per Capita Income (independent
variable)
ITR = Interest Rate (independent
variable).
In a linear function, it is
represented as follows:
GDP=bo +bITPS+b2 PCY +b3ITR+Ut ……..3.2
Where
bo = Constant term
b1 = Regrssion
coefficient of TPS
b2 = Regresion
coefficient of PCY
b3 = Regression
coefficient of ITR
Ut = Stochastic
error term
3.2
MODEL EVALUATION
At this level of research, using a time series data, the
research estimates the model with ordinary least square method. This method is
preferred to others as it is best linear unbiased estimator, minimum variance,
zero mean values of the random terms etc (koutsoyiannis 2001).
The tests that will be considered in this study include:
Coefficient of multiple
determinations (R2)
Standard error test (S.E)
T- test
F- test
Durbin Watson statistics
Coefficient of multiple
Determination (R2): it is used to measure the proportion of
variation in the dependent variable which is explained by the explanatory
variables. The higher the (R2) the greater the proportion of the
variation in the independent variables.
Standard Error test (S.E): it
is used to test for the reliability of the coefficient estimates.
Decision
Rule
If S.E < 1/2b1,
reject the null hypothesis and conclude that the coefficient estimate of
parameter is statistically significant. Otherwise accept the null hypothesis.
T- test: it is used to test
for the statistical significance of individual estimated parameter. In the
research, T- test is chosen because the population variance is unknown and the
sample size is less than 30
Decision
Rule
If T- cal > T-tab, reject
the null hypothesis and conclude that the regression coefficient is
statistically significant. Otherwise accept the null hypothesis
F- test: it is used to test
for the joint influence of the explanatory variables on the dependent variable.
Decision
Rule
If F – cal > F – tab,
reject the null hypothesis and conclude that the regression plane is
statiscally significant. Otherwise accept the null hypothesis.
Durbin Watson (DW): It is used to test for the
presence of autocorrelation (serial correlation).
Decision
Rule
If the computed
Durbin Watson statistics is less than the tabulated value of the lower limit,
there is evidence of positive first order serial correlation. If it is greater
than the upper limit, there is no evidence of positive first other serial
correlation. However, if it lies between lower and upper limit, there is inconclusive
evidence regarding the presence or absence of positive first order serial
correlation.
3.3 SOURCES OF DATA
The data for the research project is obtained from the
following sources:
--Central Bank of Nigeria
statistical Bulletin for various years,
--Central Bank of Nigeria
Annual Account for various years.
--Central Bank of Nigeria
Economic and financial Review for various years.
REFERENCES
Gujarati D. N
(2004), the Theory of Economics, United State. Military Academy, West Point,
McGraw Hill. MC Brook Co-sing apore.
Koutsoyiannis A.
(2001). Theory of Econometrics, Pal Graw Hill Mills, Fift Avenue New York.
CHAPTER FOUR
4.0 PRESENTATION
AND ANALYSIS OF RESULTS
The attempt to study the impact of
private domestic savings on Nigerian economic growth from 1980-2009, led the
researcher to subject the data collected to regression analysis.
4.1 PRESENTATION
OF RESULT FROM MODEL 1
Table
(4.1)
variables
|
coefficient
|
Std.
error
|
t.
statistic
|
C
|
1.057964
|
0.786046
|
1.345932
|
Log(TPS)
|
0.718242
|
0.077949
|
9.214245
|
Log(ITR)
|
0.188995
|
0.323663
|
0.583924
|
LogPRY)
|
0.336653
|
0.121560
|
2.769431
|
R2
= 0.953909
F
– value = (4,26) 179.3653)
Dw
– ratio = 2.122052
From the result above, the
coefficient of real Gross Domestic product (RGDP) shows positive relationship
with the total private saving (TPS). This is in line with our expectation
assumption. This implies that an increase in total private saving in the
economy will increase the Real Gross Domestic Product by 0.7182 percentage.
However, from the statistical point of view this variable (ITR) is statistical
significant to their study since its
t-statistic computed is greater than the critical value from statistical table
at 5 percent level of significant (1.699). The coefficient of interest Rate
(ITR) shows a positive relationship with the Real Gross Domestic Product
(RGDP). It is also in line with the theoretical apiror assumption. This implies
that a percentage increase in interest rate to deposit money at commercial bank
will increase the level of saving which in turn, influence or increase the
level of Real Gross Domestic Product in the economy through investment. Thus,
from statistical point of view, interest rate shows statistically significant
to the study, since its t-computed is greater than zero (0.188995)
Finally, the coefficient of per
capita income (PRY) shows positive relationship with the Real Gross Domestic
Product. From the prior assumption, it expected that increase in per-capita
income of any economy or country influence or impact positively to the (RGDP),
therefore it is in order of its expectation. The implication is that, if one
percent increase in per-capital income (PRY) will finally reduced poverty level
of the country thereby increasing level and rate of saving which in turn impact
positively to the real Gross Domestic Product use as the measure of economy
growth variable.
Meanwhile, the coefficient of
determination (R2) stood at 0.953909, rank very high. This implies
that the variables chosen for determination of private domestic saving explain
or account 95% influence or movement on real Gross Domestic Product as a
measure of economy growth, while 5 percent only account could be explain by
other variables or factors not included in the model.
The f-value computed stood at (4,26)
= 179.3653 which is group influence of all the independent variables to
dependent variables is very strong statistically significant to the study.
Since is greater than f-tabulated at 5% level of significant by (4.22).
Finally, the D.W ratio is 2.122
shows positive presence of auto correlation among the variables in the model.
4.2 TEST
OF HYPOTHESIS
Table
(4.2)
variables
|
t-computed
|
t-tabulated
|
Observation
|
Decision
|
TPS
|
9.214245
|
1.699
|
T-com>T-tab
|
Reject
Null
|
ITR
|
0.583924
|
1.699
|
T-com<T-tab
|
Accept
Null
|
PRY
|
2.7694
|
1.699
|
T-com>T-tab
|
Reject
Null
|
From the table above, it shows that the
T-computed of Total Private Domestic Saving is greater than the T-tabulated at
5 percent level of significant. Therefore, we reject the null hypothesis that
say that private domestic saving has no significant effect on economic growth
in Nigeria and accept the alternative hypothesis and concluded that private
domestic saving has significant effect on economic growth in Nigeria during the
period of observation. Thus the t-computed of interest rate (ITR), is less than
the critical value at 5 percent level of significant. Therefore, we accept the
null hypothesis and reject the alternative. However, the t-computed of
per-capital income is greater than the t-tabulated, we reject the null
hypothesis and conclude that private domestic saving has significant impact on
Real Gross Domestic Product which is the measurement of economic growth
CHAPTER FIVE
SUMMARY, CONCLUSION AND POLICY
RECOMMENDATIONS
5.1 SUMMARY
OF FINDINGS
This research work evaluated the
impact of private domestic savings on the Nigeria’s economic growth from
1980-2009.
The researcher used TPS per capita
income as proxy for domestic savings as well as proxied RGDP for economic
growth. Using ordinary least square techniques, the following findings or
observations sufficed.
1) Private
domestic savings have significant impact on the Nigerian economy. (O. 945890)
ii) The
entire regression plane is statistically significant. This means the joint
influence of the explanatory variable (TPS, PCY, and ITR is statistically
significant).
iii) The
computed coefficient of determination (R2) shows that 95.39% of the
total variations in the dependent variable (GDP), is influenced by the
variation in the explanatory variables namely Per Capital Income (PCY), Total
Private Savings (TPS) and Interest Rate (ITR)
iv) The
total variation of 4.61% in the dependent variable is attributable to the
influence of other factors not included in the regression model.
v) There is no evidence of positive first
order serial correlation.
5.2 CONCLUSION
From the findings of the study, the following can be
inferred.
i. Per capita income (PCY) has a small
positive impact on the size of saving in Nigerian economy. This suggests that-
PCY, representing average income of Nigerian, is still very low, because of
abject poverty.
ii. Total private savings (TPS) has a
positive impact on GDP. This stems from the fact that-domestic savings
stimulates GDP through investment.
iii. Interest rate equally has a positive
impact on the economic growth in Nigeria, because, it encourages savings which
could be used for investment.
Hence, in the era of an ever-changing global economic
environment, especially now that the current economic approach of most
countries is gearing towards transforming their system for rapid and sustained
economic growth, Nigeria cannot be left out. Thus, this research work examines
the impact of private domestic savings on the Nigeria’s economy within the
period under study; 1980-2008.
It is discovered from the study that increase in per
capita income of the populace is very crucial- as it leads to savings
mobilization that could as well imbuse GDP through investment
5.3 POLICY
RECOMMENDATIONS
In the light of the researcher’s
finding, the following recommendations are presented;
i. The
CBN should exercise policy influence that would affect the behavior of private
sector toward saving; namely balance money demand function (M2), interest rate
that will attract saving and also encourage investment since saving
theoretical, is equal to investment, banks credit etc. in the overall liquidity
of the economy.
ii. In
the bid to achieve economic growth, monetary authority in Nigeria should apply
discretion in implementing same of their policies in order to favour private
sector investment (saving) especially the agricultural sector, small scale
industries.
Iii Monetary
policy should be used to fight against high rate of inflation in the country
because it is one of the factors that discourage saving and investment in the
economy.
Iv Government
should strive to strengthen the financial system for easy implementation of
monetary policy and reliability of individuals on their financial value and
stand in the economy.
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