ABSTARCT
The study investigated the
determinants of household saving in Nigeria utilizing OLS estimation technique
using annual time series data between 1970 and 2014. While level of income
appears to be the centrepiece of most theories on determinants of household
saving in the literature. The empirical results as reported in the context of
this study given the period under consideration rather indicate financial
development and social security payment as significant and main determinants of
household saving in Nigeria. What this portends economically is that household
saving culture can be effectively enhanced via competent financial development
system coupled with viable social security financing. To this end, policies that seek to improve
saving culture of Nigerian household should focus on promoting a competence and
an efficient financial system. Secondly, a corrupt free expansion of government
finance of social security payment is recommended since it has tendency of
improving welfare, income level and consequently the saving rate.
TABLE
OF CONTENTS
Pages
Title
page i
Certification
ii
Dedication
iii
Acknowledgement
iv
Abstract
v
Table
of contents vi
Chapter
One: Introduction
1.1 Problem
Statement 1
1.2 Objectives
of the Study 2
1.3 Justification
for the Study 3
1.4 Scope
of the Study 4
1.5 Plan
of Study 4
Chapter
Two: Background to the Study
2.1 Introduction 5
2.2 Trend
Analysis of key variables 5
2.3 Policy
Developments 11
2.4 Institutional
Developments 12
Chapter
Three: Literature Review
3.1 Introduction 15
3.2 Review
of Theoretical Framework 15
3.2.1 Absolute income hypothesis 15
3.2.2 Relative income hypothesis 17
3.2.3 Permanent income hypothesis 17
3.2.4 Life
Cycle Hypothesis 19
3.3
Review of Methodology 22
3.3.1 Review
of Micro Data Based Methodology 22
3.3.2 Review
of Macro Data Based Methodology 23
3.4
Review of Empirical Results 25
3.4.1 Micro
Data Based Empirical Results 25
3.4.2.Macro
Data Based Empirical Results 27
Chapter
Four: Theoretical and Methodology
4.1
Introduction 30
4.2
Theoretical Framework 30
4.3
Model Specification 33
4.4
Data Sources 35
4.5
Estimation Technique 35
Chapter
Five: Empirical Analysis
5.1 Introduction 36
5.2 Descriptive
Analysis of Variables 36
5.3
Empirical Results 38
5.4
Diagnostic
Test/Stability of Model 40
5.5
Results Comparison 43
Chapter
Six: Summary, Recommendations and Conclusion
6.1 Introduction 45
6.2 Summary
of major Findings 45
6.3 Conclusion 46
6.4 Recommendation 47
6.5 Limitations
of Study 47
REFERENCES 49
APPENDIX 53
LIST
OF TABLES AND FIGURES
Figure 1. Showing the trends in real interest rate
Figure 2. Showing aggregate national savings (1970-2015)
Figure 3. Showing trends in domestic savings and domestic investment
(1981-2014)
Figure 4. Showing trends in domestic savings and gross domestic product
(1981-2014)
Table 2.1. Showing gross national domestic savings performance in Nigeria
(1981-2014)
Table 5.1 Showing descriptive statistics
Table 5.2 Showing unit root test results
Table 5.3 Showing empirical results
CHAPTER
ONE
INTRODUCTION
1.1
Problem
Statement
Saving
anywhere in the world remains one of the most important types of household‘s
economic activities. To this end therefore, an adequate supply of domestic
and/or household saving remains a core national policy objective; mainly due to
its direct impact on growth process as well as its role as domestic investment
stimulants. Rehman, Bashir and Faridi (2011) and Ogbokor and Samahiya (2014)
further reaffirms the inevitability of saving in the economy by stressing the
fact that, higher savings rate is crucial for long term investment process,
which in turn manifest into industrialization that breeds; employment
opportunities and economic development. Given the increasing integration of
international financing for instance, it is high domestic saving that can
ensure macroeconomic stability internally. This postulations of positive
influence of savings on investment and subsequently growth and development is
an indication that savings matters for growth and development anywhere in the
world.
Ironically
however, it is the dismal household saving record in most African countries
relative to other regions of the world that have been of concern to economists
in the recent time. Despite the increasing trend of national domestic savings
in Nigeria, the country is yet characterized with low investment and output
growth thus, suggesting that her average saving rate ratio is still far from
being impressive. Reaffirming this poor state of saving –investment and output
relationship is Iyoha (1998), who attributes the mid-1980s negative output
growth rate host of factors but mainly
to decline in investment and savings. In a similar development, Nnanna (2003) also
posited that the underdevelopment state of the Nigerian economy is due to her
poor savings and in investment culture. Basically, there is lack of incentives
to household savings in Nigeria mainly due to: (i) lack or poor understanding
of household savings determinants; and (ii) high saving mobilization cost in
terms of the transaction costs involved and also the cost of overcoming the
information asymmetry related to ensuring savers are convinced of postponing
their consumption to a future date.
While
acknowledging the vast of empirical literature that have shed light on various
aspects of saving behaviour, it is also worth noting that, crucial questions yet
remain unanswered with regard to factors with potential for enhancing the
performance of household savings. Germane in this study are issues centered on:
(i) effectiveness of higher income rate as stimulus for raising household
saving rate in Nigeria; (ii) effectiveness of financial development for
enhancing household savings behaviour in Nigeria; and whether there a role for
monetary policy in increasing household savings in Nigeria?.
1.2
Objective
of the Study
In
attempt to address the aforementioned research issues, the focal point of this present
study is to determine the probable determinants of household savings in the
case of the Nigerian. To achieve this broad objective, the study will
specifically:
1. Examine
the effectiveness of higher income growth in raising household saving rate in
Nigeria.
2. Examine
the effectiveness of financial development for enhancing household savings
behavior in Nigeria.
3. Examine
the role of monetary policy in increasing household savings in Nigeria
1.3
Justification
of the Study
Although
there are a number of country specific studies focusing on saving and factors
that explain saving behavior in Nigeria. However, most of these studies namely;
Akpan (2011), Obayelu (2012), Abiara and Arosanyin (2014), Osondu et al.
(2015), among others, are rather micro based in nature. The present study would
however, expand the frontier of knowledge on the issue of household savings;
especially in the view of dearth of macro level empirical analysis on the
determinant of household saving in developing economy such as Nigeria.
Essentially, the study will deviate from the usual disaggregated mode of
evaluating saving behavior in order to provide a useful empirical framework on
an effective and smooth transition of national savings to investment and
sustainable development. Hence, if the outcome from each tool (i.e. the
response of household saving to national income level, financial development
and monetary policy) is known on the basis of the empirical evidence to be
provided by this study; such would assist the policy makers in understand the
effectiveness of each of these instruments as a stimulant of household saving
in the context of Nigerian economy.
1.4
Scope
of the Study
This
present study narrows its analysis of household saving determinant to Nigeria
as a case study. It uses annual time series data ranges from 1970 and 2017 to
evaluate the response of the Nigeria national saving growth rate to a number of
probable saving determinants.
1.5
Plan
of Study
Following
this introductory chapter, the other chapters are as follows: Chapter two
provides background analysis on saving behaviour in Nigeria. Chapter three
dwells on the existing theory and empirical literatures. Chapter four discusses
the methodology and model specification. Chapter five analyzes the empirical
results while Chapter five draws conclusion and provide policy implications.
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