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Factors That Reduce Savings In Nigeria (1980-2010)
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The 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,
Registrar and stock brokers, who also interact with the money market,
complex 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 Nigeria. Saving is a sacrifice of current consumption that
provides for the accumulations of capital, which in term provides
additional output that can potential be used for consumption in the
future (Gersovitz1988). In other words, savings is the difference
between current earnings and consumption. It has also been defined as
“deferred consumption†or part of income, which is not spent.
Savings
is described as a financial assets accumulated by the public- both
government and private agents in the organized financial system. To
expand 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, income growth, employment and capital
formation: which cannot be achieved without increasing the rate of
savings, Nigeria‟s saving still falls below the requirements of its
financial system due to low per capital income, under- investment in
productive instruments, and investment in unproductive channels, e.g.
gold, jewelry, income inequalities and demonstration effect Etc. to
remedy this problems depend on the level of development of the financial
sector mentioned above as well as the savings habit of the citizenry.
The availability of investible funds can be a starting point for all
investments in the economy, which will eventually translate to economic
growth and development (Uremadu, 2006). The relationship among saving,
investment and growth has historically been very close; hence, the
unsatisfactory growth performance of several developing countries.
Example: Nigeria 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 uncertain balance of payments position (Chete, 1999). 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. Instructions in financial sector like
deposit money banks (DMBs)/commercial banks mobilize savings in a
economy, the deposit rate must be relatively high and inflation rate
stabilized to ensured a high positive real interest rate, which
motivates investors to save from their disposable income. In Nigeria
Nnann, Odoko and Englama (2004) are of the view that the level of funds
mobilization by financial institutions are 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 impediment
to funds mobilization is the attitudes of banks to small savers.
Another Limitation to savings mobilization is the fact that the
concentration of banks and their offices are biased in favor of urban
areas. Among the reasons for this, is the fact that the established
banks under- rate the volume of saving to be mobilized and channeled
into productive investment in the rural areas. It is often argued that
since the rural economy operates at a near subsistence level, there is
very little that can be squeezed out of income and consumption. Because
of this, it has not been realized that large volume of idle funds,
though in small units per individual exist in the rural areas. In
Nigeria, there is basically lack of incentives to savings which had
adversely affects savings. Some of these factors include; poor banking
habits, attitudes of banks to small savers, poor orientation,
unemployment, instability in the political system, corrupt taxation
system, instability in the banking system, etc. one of the economic
growth and development in Nigeria.
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ABSRACT - [ Total Page(s): 1 ]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 ... Continue reading---
