IMPACT OF SAVINGS MOBILIZATION ON ECONOMIC DEVELOPMENT IN NIGERIA BANKING INDUSTRY CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
It is universally acknowledged that the banking industry plays a catalytic role in the process of economic growth and development. This acknowledgement is reinforced by contemporary conceptualism to the effect that banks are a veritable vehicle for mobilizing resources from surplus units and tempting same to deficit unit. Banks constitute perhaps the most important segment of the financial market through mobilizing savings, but also allocating them for investment purposes. In Nigeria, domestic savings rate is relatively low compared to other developing countries with the same capital income level. In the past, investment rates were high and hence there was no problem for raising funds. Under the present economic dispensation, the companions or the drive for savings deposit has been stepped up by banks and non- bank financial institutions. It is However not sufficient because the range and type of financial assets available are equally important. There is a wide range of saving instruments offered by banks and non – bank financial institutions in Nigeria today (Adewunmi, 1996:867).
However, most of the voluntary and non – contractual financial savings consist of savings and time deposit. Although other types of deposit such as savings certificate and premium savings bonds play important roles in banks and non – banking institutions. Banking institutions are today competing strongly with additional frame benefits which almost all banks are now offering. This contractual forms of savings is aimed at persuading depositors to invest in long term deposits. Another area some banks are foreseeing to mobilize funds today is the mortgage saving: because large number of Nigerians need accommodation of their own but funding it is difficult with their meager income. Interest payment on deposits accounts also have some positive impact on the propensity to save. Bank have also been allowed by the government to open domiciliary account for Nigerian exporters in which the proceeds of exports can be paid or saved until when they are needed. Transaction costs related to operating a new accounts and making deposits and withdrawals are now becoming relatively easier particularly for small savers. There is also the pension scheme which seeks to induce depositors to invest small sums of money over a specified period of time in the hope of receiving a stream of benefits upon reaching the age of retirement.
Conversely, the crisis of confidence in our banks is a great setback for the banking system. In the past the majority of those who patronized the banks did so in order to find safer place for their money. And for many years, banks in the country were the character of currency store house. But because of the lack of confidence in banks today, a sizeable amount of Nigerians keep their currency or cash at home and this makes most of the cash unpaired by the banks. Most of our industries depend on commercial bank assistance in form of overdraft, short term and long loans for effective operations (Alabi, 1999:5).
1.2 STATEMENT OF PROBLEM
Income possess the greatest constraint to savings mobilization. The generally low level of income among the people in Nigeria is a limiting factor to savings mobilization. The inadequate banking facilities in the economy in general and the rural areas in particular also constitute on obstacle to wide savings mobilization. Growing frequency of incidences of fraud, insider abuses and malpractice which all combine in an unholy alliance to erode public confidence in financial institutions and do painful damage to whatever level of banking habit has been developed. Another factor that may affect savings mobilization is the absence of effective realistic interest rate policy that rewards savers with adequate returns on their savings. It is argued that in as much as the rate of interest is adjusted for inflation reasons, savings are still likely to remain low. Perhaps the greatest problem in this country is that we run a cash economy, which hinders the financial intermediaries from performing their functions. This practice constrains mobilization of funds, with the consequence that banks create small amount of deposit when compared to the amount demanded as loan by the economy.
1.3 OBJECTIVES OF THE STUDY
The aim of the study is to examine the impact of saving mobilization and the available ways of achieving efficient and effective channeling on economic growth. The research is aimed at:
1. Examining the impact of saving mobilization on the economic development.
2. Recommending measures for improving greater mobilization of domestic resources in our banks.
3. Identifying the means throughout which the mobilized funds can effectively be channeled to the growth and development of economy.
4. Identifying the effect of interest rate mobilization of domestic savings.
5. Identifying the effect of bank distress in deposit acquisition.
6. Determining the effects of income earned to savings mobilization.
1.4 RESEARCH QUESTIONS
(1) Does saving mobilization have any impact on the development of the Nigeria economy?
(2) Has there been an improvement measure towards achieving greater dogmatic resources in our banks?
(3) Does the mobilization of domestic savings contribute to the economic growth of the economy?
(4) Does the interest rate charges on the mobilization of domestic savings positive?
(5) Does the bank distress syndrome have any significant effect to the deposit acquisition?
(6) Does the propensity to save income earned have effect on the mobilized savings of the bank?
.