THE EFFICACY OF INTEREST RATE DEREGULATION ON SAVINGS MOBILIZATION IN THE NIGERIAN ECONOMY

THE EFFICACY OF INTEREST RATE DEREGULATION ON SAVINGS MOBILIZATION IN THE NIGERIAN ECONOMY (ECONOMICS PROJECT TOPICS AND MATERIALS)

ABSTRACT

The objective of this study was to examine the impact of interest rate deregulation on savings mobilization in the Nigerian Economy, using a time series annual data of \980-2008. The central focus of this work is to investigate whether deregulated interest rate mobilizes savings as against the Pre-SAP era which was a fixed rate policy. The study made use of secondary data derived from Central Bank of Nigeria, using time series annual data for a period of 28 years. We employ both descriptive and econometric techniques to analyze our model which comprises of six variables based on the theoretical underpinning. at the of the study, it was revealed that deregulated interest rate policy in Nigeria since 1987 had positive impact on the level of savings mobilized as against the PRE-SAP era which shows an insignificant or stagnant effect on savings mobilized in the economy. Base on this result, the question is how is the savings mobilized does not have effect on the real sector of the economy or was it that, the fund was not channeled into the productive sectors or no macroeconomic environment to enhance the funds for economic growth and development? Finally, the study recommended to the policy makers that the problem of economic recession is not deregulated interest rate policy but rather on the part of the government in providing the macroeconomic environment such constant Power Supply, Good network, political stability, security and others, arc determinants of investment, economic growth and development .and not only deregulated interest rate policy.

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Interest rate is a vital tool of macroeconomic management for the government of any country in the world. The level of interest rate in any economy especially the Nigerian economy is crucial in view of its role in controlling inflation, inducing savings which can be channeled to investment and thereby increasing employment output, and efficient financial resource utilization. The 1960s to mid-1980s witnessed the administration of low interest rates which was intended to encourage investment ( Ajakaiyc Olu and Ayodele, 1994).

The advent of the structural adjustment programme in the third quarter of 1986 ushered in an era of dynamic interest rate regime where interest rates were more influenced by market forces. This shift de-emphasized direct investment stimulation through low interest rates and encouraged savings mobilization by decontrolling interest rates (Essien and Oniwioduokit, 1997). Such liberalization represents a policy response, encompassing a package of measures to remove all undesirable state imposed constraints on the free working of the financial markets. The measures include the removal of interest rate ceiling, and the loosening of deposit and credit controls (Uremadu,S.O.:2006 ).The mobilized fund was intended for investment,

THE EFFICACY OF INTEREST RATE DEREGULATION ON SAVINGS MOBILIZATION IN THE NIGERIAN ECONOMY (ECONOMICS PROJECT TOPICS AND MATERIALS)