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

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.