Authors : Fidelis O. Ogwumike and Donald Ikenna Ofoegbu
Abstract: The study used an Autoregressive Distributed Lagged (ARDL) estimation technique, built on the McKinnon complementary hypothesis framework to investigate the impact of financial liberalisation on Nigeria’s domestic savings, 1970-2009. The results revealed that given domestic savings, immediate past financial liberalisation, lagged one, displayed a minimal positive effect, though significant did not last long as it turned to a significant negative effect in the long run. The trend in shifting effects is attributed majorly to inconsistency or lack of continuity in the implementation of financial liberalisation reforms and the unhealthy state of the financial sector. Financial liberalisation did not bring about positive real interest rate to encourage savings. Credit to the private sector however had a strong positive effect on the level of domestic savings in the long and short run. The study therefore concluded that interest on deposit induced by liberalisation was not the major determining factor that propelled depositors to save or increase savings but lack of investment alternatives outside financial assets. Further, lack of effective competition among banks inhibited the impact of interest deregulation on savings.
Fidelis O. Ogwumike and Donald Ikenna Ofoegbu, 2012. Financial Liberalisation and Domestic Savings in Nigeria. The Social Sciences, 7: 635-646.