Private Domestic Savings Mobilization by Commercial Banks and Economic Growth in Nigeria

Öz

Özet: This study discusses private domestic savings by commercial banks and economic growth in Nigeria and reviews theories on the determinants of private domestic savings and the impact of savings on economic growth. It also examines the determinants of private domestic savings in Nigeria during the period covering 1986 – 2010.The broad objective is to identify instruments to be used by commercial banks to mobilize savings and to also examine the impact of that private domestic savings on economic growth of Nigeria. It makes an important contribution to the literature by evaluating the magnitude and direction of the effects of money supply, interest rate, inflation rate, exchange rate and per capita income on private domestic savings. We went further to examine the impact of private domestic savings and commercial banks credit to private sector on economic growth of Nigeria. The framework for analysis involves the estimation of a private domestic savings function and economic growth function derived from the Life Cycle Hypothesis. The study employed classical least squares method with the aid of Error-Correction modeling procedure, co-integration, granger causality and stationarity test which minimize the possibility of estimating spurious relations, while at the same time retaining long-run information in the work; as well as the nature of causality between independent variables and dependent variables of our two functions specified in this research work. The results of the analysis show that the money supply and per capita income are strong determinants of private domestic savings for the period under study and private domestic savings and commercial banks credit to private sector turnout to be the leading factors that propel economic growth in Nigeria according to this research results. It was also revealed that, unethical banking practices by Nigerian commercial banks have rendered interest rate impotent to drive savings mobilization.

Öz

Özet: This study discusses private domestic savings by commercial banks and economic growth in Nigeria and reviews theories on the determinants of private domestic savings and the impact of savings on economic growth. It also examines the determinants of private domestic savings in Nigeria during the period covering 1986 – 2010.The broad objective is to identify instruments to be used by commercial banks to mobilize savings and to also examine the impact of that private domestic savings on economic growth of Nigeria. It makes an important contribution to the literature by evaluating the magnitude and direction of the effects of money supply, interest rate, inflation rate, exchange rate and per capita income on private domestic savings. We went further to examine the impact of private domestic savings and commercial banks credit to private sector on economic growth of Nigeria. The framework for analysis involves the estimation of a private domestic savings function and economic growth function derived from the Life Cycle Hypothesis. The study employed classical least squares method with the aid of Error-Correction modeling procedure, co-integration, granger causality and stationarity test which minimize the possibility of estimating spurious relations, while at the same time retaining long-run information in the work; as well as the nature of causality between independent variables and dependent variables of our two functions specified in this research work. The results of the analysis show that the money supply and per capita income are strong determinants of private domestic savings for the period under study and private domestic savings and commercial banks credit to private sector turnout to be the leading factors that propel economic growth in Nigeria according to this research results. It was also revealed that, unethical banking practices by Nigerian commercial banks have rendered interest rate impotent to drive savings mobilization.

Anahtar Kelimeler

• Domestic,saving mobilization,Economic growth,Commercial banks’ credit,Per capita income,Money

Kaynakça

1. Afolabi, J.A, Ogunleye R.W. and Bwala S.M. (2003), “Determinants of Interest Rate Spread in Nigeria: An empirical Investigation”. NDIC Quarterly, 13(1):31 – 54.
2. Aghevli, B., Boughton, J., Mortiel, P., Villanueva, D., and Woglom, G. (1990),” The Role of National savings in the World Economy: Recent Trends and Prospect”. IMF Occasional Papers, No. 67, Washington D.C.
3. Ando A. and Modigliani F. (1963), “The Life Cycle Hypothesis of Savings: Aggregate Implications and Test”. American Economic Review, 53(1).
4. Anyanwu, J.N and Oaikhenam, H.E (1995) Macroeconomics Theory and Application in Nigeria. In Alaku A.N (1998). “Determinants of Savings behavior as a factor in economic growth”. Unpublished B.sc thesis, Department of Economics, University of Nigeria, Nsukka.
5. Azege M. (2007), “The Impact of Financial Intermediation on Economic Growth: The Nigerian Perspective”, Research Paper, Department of Economics, Lagos State University.
6. Balassa, B. (1989), “The Effects of Interest Rates on savings in Developing Countries”. World Bank Working Paper, (56), September, 1989.
7. Barajas, A., Steiner R., Salazar N. (2000), “Foreign Investment in Colubia’s Financial Sector” In the Internationalization of Financial Services. Issues and Lessons for Developing Countries. Kluwe Academic Press, 2000.
8. Bencivenga, V.R. and Smith, B. (1998), “Economic Development and Financial Depth in a Model with costly Financial Intermediation” Journal of Research in Economics, (52): 363 – 386.

9. Berger, A.N and Udell G.F (1995), “Relationship lending and lines of credit is small firm finance,” Journal of Business, (68):351 – 382, 1995. University of Chicago Press.
10. Berger, A.N. and Udell, G.F. (1996), “Universal Banking and the future of small Business lending,: In financial system Design: the case for Universal Banking Irvin Publishing, 1996.
11. Berger, A.N. and Humphery, D.B. (1997) “Problem Loans and cost Efficiency in commercial Bank.” Journal of Banking and Finance. Federal Reserve Bank.
12. Berger, A.N., Saunders, A., Scalise, J., and Udell, G.F (1998). “The Effects of Bank Mergers and Acquisitions on Small Businesses Lending”. Journal of Financial Economics, 187 -229, 1998.
13. Berger, A.N., Klapper, L. and Udell, G.F (2000), “The Ability of Banks to lend to Informationally Opaque Small Businesses”. World Bank Papers 2000, Washington D.C.
14. Bigstein and Soderbom (2005), “Credit Constraints in Manufacturing Enterprises in Africa”. The Centre for the study of African Economics Working Paper Series, Oxford University Press.
15. Bloch, H. and Tang S.H.K, (2003), “The Role of financial Development in Economic Growth” Progress in Development Studies, 3 (3):243 – 251.
16. Borary, Y. and Sierra (1993), “Assessing Bank Performance and the Impact of Financial Restructuring in a Macroeconomic Framework” Journal of financial Economics.
17. Boskin, M.J (1978), “Taxation, Savings and the Rate of Interest”. Journal of Political Economy, 86:523 – 527.
18. Brown, T.M. (1952), “Habit Persistence and Lags in Consumer Behaviour”. Econometrica, 2 (3), 1952.
19. Brown bridge and Gayi (1999), “Progress, Constraints and Limitations of Financial Sector Reforms in the Least Developed Countries.”. World Bank Papers, 1999.
20. Chaudavartkar, A.J. (1971), “Some Aspects of Interest Rate Policies in Less Developed Economics” IMF Staff Papers, 1971, March.
21. Chete, L.N. (1999), “Macroeconomic Determinants of Private savings in Nigeria”. Nigerian Institute of Social Science and Economic Research (NISER) Monograph Series, 7:1-4.
22. Central Bank of Nigeria (2007), “Explanatory Notes”. CBN Statistical Bulletin, 15: XVII – XVIII.
23. Clarke, G., Cull W., D’Amato, and Molineri, A. (2000), “ON the Kindness of Strangers? The Impact of foreign entry on Domestic Banks in Argentina.” In the internationalization of financial services: Issues and lessons for Developing countries. Kluwer Academic Press Argentina.
24. Classens, S., Demirguc-Kunt, and Huizing, H (2000), “The Role Of Foreign banks in Domestic Banking Systems” In the Internationalization of Financial Services: Issues and Lessons for Developing Countries. Argentina: Kluwer Academy Press.
25. Dages, B.G, Goldbers, L. and Kinney D. (2000), “Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina”. Federal Reserve Bank of New York Economic Policy Review, 17-36.
26. Deaton, A. (1977), “Involuntary Savings Through Unanticipated inflation”. American Economic Review, 67:800-910.
27. Demirguc - kunt, Asli and Enrica, D. (1998), “The Determinants of Banking crisis in Development and Developed Countries”, IMF papers, 45:81 – 109.
28. Demirguc – Kunt and Maksinovic (2000), “Capital Structure in Developing Countries”. The Journal of Finance, IMF. 2000.
29. De Young R. (1998), “Management Quality and X – inefficiency in National Banks”. Journal of Financial services Research, 13:5 – 22. IMF
30. De Young R. Goldberg L.G, White L.J (1999), “Youth, Adolescence, and Maturity of Banks Credit availability to small Business in an era of Banking
31. consolidation”. Journal of Banking and
32. Finance, 23:463 – 492 IMF.
33. Diamond D.W., (1983), “Bank Runs, Deposit Insurance and Liquidity” Journal of Political Economy, University of Chicago Press.
34. Dickey, D.A and Fuller, W.A, (1979), “Distribution of the Estimators for Autoregressive Time series with a Unit Root,” Journal of the American Statistical Association. 74,1979.
35. Donald, D.A and Ndikumanah (1998), “Financial Intermediation and Economic Growth in Southern Africa”. Working Papers, Federal Reserve Bank, St. Louis
36. Dornbush, R (1990), “Economic perform in Eastern Europe and Soviet Union: Priorities and strategy”. Mimeo, The World Bank, Washinton D.C.
37. Duesenbury, J. (1949), Income, savings, and the Theory of consumer Behaviour, Cambridge, M.A: Harvard University Press.
38. Escude G., Burdisso, T., D’ Amato, L., and MacCandless (2001), “Howmuch do SME borroe from the Banking system in Argentina? Mimeo, Banco Central de la
39. Republic, Argentina”.
40. Francisco, Norman and Loyza (2000) “Financial Markets and the Financing
41. Decisions in Chilean
42. firms” In financial structure and economic
43. development, World Bank Conference, Washington D.C.
44. Friedman, M. (1957), A Theory of the consumption function, Princeton: Princeton University Press.
45. Fry, M. (1989), “Foreign Debt Instability: An Analysis of National savings and Domestic Investment Responses to Foreign Debt Accumulation in 28 developing countries”. Journal of International
46. Money and Finance, 8:315 – 344.
47. Gelos and Werner A. (1999), Financial Liberalization, credit constrainst and collateral investment in the Mexican manufacturing Sector”. IMF working paper series.
48. Gerlach and peng (2005), “Bank Lending and Property prices in Hong Kong: Journal of Banking and Finance, 29:461 – 481, 2005.
49. Ghatak, S. and Siddiki, J.U (2001), “The use of the ARDL Approach in Estimating Virtual Exchange Rates in India”, Journal of Applied statistics, 28(5): 573 – 583.
50. Goldberg, L.G (1992), “The Competitive Impact of Foreign Commercial Banks in the United states”. In the changing market in financial services, economic policy conference of Federal Reserve Bank of St. Louis.
51. Golgberg L.G and White L.J (1998), “De Novo Banks and Lending to Small Business: An Empirical Analysis”, Journal of Banking and Finance, IMF 22:851- 867.
52. Goodhart C., (1995), “House Prices, Money, Credit, and the Macro – economy,” Journal of Economic Perspectives, U.S.A 9:49 – 72.
53. Greenwood J., and Jovanovic, B. (1990) “Financial Liberalization, financial Development and economic development” Quarterly Journal of Economics, 108:717 – 738.
54. Gujarati N.D (2007), Basic Economics. New York: McGraw Hill, Inc, 4th Edition.
55. Gupta, K.L (1970), “Personal savings in Developing Nations: Further Evidence” Journal of economic, Record World Bank 46:243 – 249.
56. Gylfason, T. (1981), “Interest Rates, Inflation and Aggregate Consumption Function”. Review of Economic and Statitics, LXII (2):233 – 243
57. Holfamnn, M (2008), “Consumption Risk sharing over the Business cycle: The Role of Firm’ Access to credit markets”, www.iew.uzh.ch/itf
58. Howard, D.H. (1978), “Personal Saving Behaviour and the Rate if Inflation” Review of Economics and Statistics, 60:554 – 554.
59. Lan D., Jack G., and Ananth M., (2000), “International corporate finding Decisions in financial structure and Economic Development”. World Bank Conference paper, Washington D.C, www.worldbank.org
60. Jenkins, H., (2000), Commercial bank Behaviour in Micro and Small Enterprise Finance”. Development Discussion paper, 741, Harvard University, 2000.
61. Jhinghan M.I., (2003) Macroeconomic Theory, 11 the Edition., Delhi press.
62. Johansen, S. (1991), “Estimation and Hypothesis Testing of Co-integration vectors,in Gaussian Vector Autoregressive Models”. Econometrical, 59:1551 – 1580, 1991
63. Kaldor, N. (1940), “A Model of the Trade Cycle,” Economic Journal, 50:78 – 92
64. Kecton, W. (1996), “Do Bank Mergers Reduce lending to Businesses and farmers Federal Reserve Bank of Kansas City Economic Review, 81:63 – 75.
65. Keynes, J.M (1936), General Theory of Employment, Invest and Money. London: MacMillan Company Ltd.
66. Kellick, T. (1981), Policy Economics. London: Heinemann Educational Books Ltd.
67. King, R. G. and Levine R. (1993), “Finance and Growth: Schumpeter Might Be Right”. Quaterly
68. Journal of Economics, World Bank, 108:717 – 737.
69. Lewis, F and Mackinnon, M. (1986), “Government Lean Guarantees and the Failure of Canadian Northern Railway”, the Journal of Economic History 47:175 – 196.
70. Lenonian, M. and Soller, J. (1995), “Small Banks Loans, Small Business”, Federal Reserve Bank of San Francisco Working Paper.
71. Levine, R. and Loayza, N. (1999), “Financial Intermediation and Growth – Causality and Causes” World
72. Bank Policies Research Working Paper No. 2059 – 1999.
73. Levine R., (2005), “Financial and Growth: Theory and Evidence: in The handbook of Economic Growth the Nether lands: Elsevier Science Press.
74. Mackinnon, R.I (1973), Money and Banking in Economic Development. Washington D.C: The Brooking Institute.
75. Mester, Loretta, J. (1997), “What’s the Point of Credit Scoring?” Federal reserve bank of Philadelphia Business Review
76. Modigliani, F. and peroti, E. (1998), Security versus bank finance: The importance of proper enforcement of legal rules. University of Amsterdam press.
77. Motho, L.E (1986), “Interest Rates, Savings and Investment in Developing countries A re-examination of the McKinnon – Shaw Hypothesis”. IMF staff papers, 3(1):90 – 116.
78. Mwega, F.M, Ngola, S.M and Mwangi, N. (1990), “Real Interest Rates and the Mobilization of Savings: African Economic Research Consortium Papers.
79. Nnanna O.J (2002), “Montary and Financial sector policy Measures in the 2002 Budget”. NCEMA Policy Analysis series, 8(1).
80. Nnanna, O.J., Eglama, and Idoko, F.O (2004), “Finance, Investment and Growth in Nigeria”,Central Bank of Nigeria, Publications. 2004
81. NEEDS (2004), “Nigeria’s Development Challenges” (Background of NEEDS), National, Planning Commissions, Abuja Nigeria.
82. Nwasilike, O.T (2006) “Local Manufacturing Capacity Supporting the Energy and Power Sector in Nigeria”, NCD Series.
83. Olusoji, M.O (2003), “Determinants of private saving in Nigeria” NDIC Quarterly 13:85 – 96.
84. Peck, J. and Rosengren E. (1996), “Small Business Credits Availability: How Important is size of lender?” In financial system Design: The case of Universal Banking, Irvin Publishing, 1996.
85. Peck, J. and Rosengren E. (1998), “Lending and Transmission of Montery policy”. Federal Reserve Bank of Boston conference series, 39, pp. 47 – 68.
86. Pesaran, M.H, Shin, Y., Smith R.J, (2001), Y., Smith R.J, (2001), “Bounds Testing Approaches to the Analysis of level Relations” Journal of Applied Econometrics. 16:289 – 326.
87. Quigley, J.M (1999), “Real Estate prices and Economic Cycles” International Real Estate Review 2(1):1 – 20. http://elsa.berkeley.edu
88. Rouwendal, and Alessie R. (2002), “House Prices, Second Mortgages and Household Savings: An Empirical Investigation for the Netherlands, 1987 – 1994” Tinbergen Institute Discussion Papers
89. Rene, M., and Stulz (2000), “Does Financial Structure matter for Economic Growth? A Corporate
90. Finance perpective”. In Financial structure and Economic Development, World Bank Conference
91. 2000, Washington D.C www.worldbank.org.
92. Sarka, P. (2007), Financial Development and Growth of less Developed countries”. CBR Judge Institute CB, U.S.A.
93. Sanchez, J.E.G and Luis C. (2004), “Financial Intermediation, Variability and the Development process” Journal of Development Economic, 73 (1): 27 – 54.
94. Sapienza, P. and Zingales, l. (2003), “Does Local financial Development matter” The Quarterly Journal of Economics, 119:929 – 970.
95. Schmidt – Hobel and Servens. (1999), “The Economics of Savings and Growth: Theory, Evidence and implications Policy for Policy”, Cambridge University press.
96. Schmidt – Hebbel, Serven, Solimano and Seven, L. (1996), “Saving in the World: Puzzles and Polities” The Research Proposal, The World bank Paper series.
97. Shan, J.Z, Morris, A.G. and sun, F., (2001), “Financial Development and Economic Growth: An Egg – and – Chicken problem? Review of International Economics.
98. Shaw, E.S (1973), “Financial Deepening in Economic Development” New York:mOxford University press.
99. Smith A. (1976), An Enquiry into the Nature and Causes of the Wealth of Nations University of Glasgows
100. Soludo, C.C (1987), “An Econometric Study of the Market for Bank Credit In Nigeria” An unpublished M.Sc. thesis submitted to the Department of
101. Economics University of Nigeria, Nsukka.
102. Solido, C.C. (2007), “Macroeconomic Monetary and Financial Sector Development NBS Survey on the state of the socio-economic Environment.
103. Soyibo, A. and Adakanye. F. (1991), “Financial System Regulation, Deregulation and Savings Mobilization in Nigeria.” Africa Economic consortium Research
104. paper, Final Report, Nairobi, Kenya.
105. Soyibo, A. (1994), “The savings – Investment process of Nigeria: Empirical Study of the Supply Side”. African Research Concortium Paper.
106. Strahan, P. and Weston, J. (1996), “Small Business lending and Bank consolidation: Is there cause for concern?” Current issues in Economic and Finance, Federal Reserve bank of New York Journal.
107. Strahan, P. and Weston, J. (1998), “Small Business Lending and the changing structure of the Banking Industry” Journal of Banking and Finance, federal Reserve Bank, of New York. 821 – 845.
108. Tsuru, K. (2000), “Finance and Growth: Some theoretical Considerations and A Review of the Empirical Literature” Economic Department Working paper 228, Organization for Economic Co – operation and Development (OECD) Paris.
109. Umoh, O.J. (2003), “An empirical investigation of the Determinants of Aggregate National savings in Nigeria”. Journal of Monetary and Economic Integration, 3(2): 113 – 132.
110. Uremadu, S.O (2002), introduction to finance. Benin: Mindex Publishing Company Ltd.
111. Uremadu, S.O (2006), “The impact of real interest rate on savings Mobilization in Nigeria:. An unpublished Ph.D Thesis proposal submitted to the Department of Banking and finance, UNN, Enugu Campus.
112. Uremadu, S.O (2007), “Core Determinants of Financial Savings in Nigeria”. An empirical analysis for National Monetary Policy Formulation. International Review of Business research papers, 3(3):356 – 367. August 2007.
113. Walraven, N.(1997), “Small Business Lending by Banks Involved in Mergers” Finance and Economic Discussion series Board of governors of the Federal Reserve Bank, 1997.
114. Yohannes, L.G (1994), “Macroeconomic Policy and Stock market Efficiency in Nigeria: A Case Study” In: Achi, A., Wangwe S., and Drasek, A.G (Eds.). Economic Policy Experience in Africa: What
115. Have We Learned? Nairobi AERC.