Determinants of Financial Savings in Nigeria: An Empirical Analysis of Monetary Policy Stability

Abstract

This paper critically investigate the key determinants of financials and implications of monetary policy instruments on its variability in Nigeria between 1980 and 2008 dynamic long-run econometric model. The empirical results from the Engle Granger Cointegration test show a negative influence of GDP growth per capital income (PCY), board money supply (M2), and debt service ratio (DSR) and positive influence of real interest rate (RIR), interest rate spread (SLS) and domestic inflation rate in the long-run. The Augmented Dickey Fuller (ADF) unit root test result also revealed that most of the time series incorporated in this study are not stationary at level. The paper therefore submits that effort should be geared towards improving per capita income by reducing the unemployment rate in the country in a bid to accelerate growth through savings. There should also be an intensified effort to stabilize debt service ratio at moderate levels so as to ameliorate its negative impact on financial savings level in Nigeria.

Keywords: Financial Savings, Determinants, Monetary Policy Stability, Long-run and Unit root.