Empirical Analysis of Financial Sector Development and National Savings: Evidence from Nigeria Economy

Henry Waleru Akani and Austin Ayodele Momodu

International Journal of Financial Economics, 2016, vol. 5, issue 1, 46-60

Abstract: This paper set out to examine whether there is a dynamic long run relationship between financial sector development and Nigeria National Savings in addiction to determining the direction of causality among the variables. Time series data were sourced from Central Bank of Nigeria (CBN) Statically Bulletin from 1980 – 2014. The study modeled Gross National Savings as the percentage of Gross Domestic Product (GDP) as our dependent variable while our independent variables were Commercial Banks Credit as percentage of GDP (CBC/GDP), All Share Price Index as the percentage of GDP (ASPI/GDP), Broad money supply as a percentage of GDP (M2/GDP) to captured the level of financial deepening, Interest Rate (INTR), Exchange Rate (EXR) and Inflation Rate (INFR) were used. The study employed the Johansen. Co-integration Test, Augmented Dickey Fuller Unit Root Test, Granger Causality Test and Vector Error Correction Model were used to examine the relationship between the dependent and the independent variables. The empirical results demonstrate vividly that there is a long run dynamic and significant relationship between financial sector development proxied by national savings and a negative long run relationship between national savings and inflation rate in Nigeria. The static regression result indicates that all the independent variables except inflation rate have positive effect on National Savings. The Unit Root Test indicates non-stationarity at level. The study concludes that financial sector impact significantly to Nigerian total saving. It therefore recommends for financial sector deepening and well management Strategies to enhance National Savings in Nigeria.

Keywords: Financial Sector Development; National Savings; Co-Integration and Causality Tests (search for similar items in EconPapers)
Date: 2016
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