RURAL SAVINGS MOBILIZATION FOR ECONOMIC DEVELOPMENT IN NIGERIA BANKING INDUSTRY
The research was based on the topic “Savings mobilization for economic Development in Nigeria Banking Industry”. In carrying out this research, I examined thoroughly. The various factors, which militates severely against the effective and efficient mobilization of domestic savings, these factors were identified to range from the level of income earned of the saver. The interest rate that the bank pays on depts of customers, to the effect of bank distress syndrome in the banking industry. Efforts were geared towards recommending various measures the bank can use to improve greater mobilization of domestic resources in our bank. The various ways through which an increase in domestic savings mobilization can also effect on increase in economic growth and development were also identified. These include granting of loans and overdraft of deficit customer, assisting in the provision of amenities to the host community generating employment and affirming of scholarship and promotional programmes. The research was accomplished through the use of questionnaires and secondary data. The testing and analysis of relevant data obtained were done through the use of chi – square statistical test techniques.
TABLE OF CONTENTS
Title page ii
Approval page iv
Table of Contents viii
1.1 Background of the study 1
1.2 Statement of problem 6
1.3 Objectives of the study 8
1.4 Research question 11
1.5 Research hypothesis 12
1.6 Justification for the research 13
1.7 Significance of the study 16
1.8 Scope limitation and delimitations 17
1.9 Definition of terms 19
2.0 REVIEW OF RELATED LITERATURE 23
2.1 Domestic financial resource mobilization efforts
of the Nigeria financial system 31
2.2 Principal sources of savings 34
2.3 Constraints to effective mobilization of savings
for economic growth and development 37
2.4 Effect of bank distress in mobilization of savings. 41
2.5 Effects of income earned to savings mobilization 44
2.6 Effect of interest rate in mobilization of
domestic savings 48
2.7 Importance of savings mobilization and
management in economic development 50
2.8 Savings mobilization and management in Nigeria 54
2.9 Strategies for savings mobilization and
management in Nigeria 62
3.0 RESEARCH DESIGN AND METHODOLOGY 71
3.1 Research design 71
3.2 Area of study 72
3.3 Population 72
3.4 Sample and sampling procedure 73
3.5 Instrument of data collection 74
3.6 Method of data analysis 79
4.0 DATA PRESENTATION AND ANALYSIS 85
4.1 Data presentation 85
4.2 Test of hypothesis 95
FINDINGS, RECOMMENDATION AND CONCLUSION 105
5.1 Summary of findings 105
5.2 Recommendation 107
5.3 Conclusions 109
1.1 BACKGROUND OF THE STUDY
Savings are cash or physical products set aside for future use. People in rural and other low-income communities, although poor can save when they are guided and encouraged. In rural communities, savings are made through traditional credit rotation groups or purchase of domestic animals like goats, pigs, chicken or cows. Every micro-enterprise needs injection of capital or funds which may be owner’s money or a loan. When a loan is used, it is someone else who has done the saving. Micro enterprises like other businesses convert savings of the owners and of others into investment in the generation of wealth.
Mobilization according to the Cambridge dictionary is to organize or prepare something, such as a group of people for a purpose. Although this definition is right, it lacks the sense of urgency and the connection to resource capital or money. Encarta 2009 defines mobilization as to organize people or resources in order to be ready for action or in order to take action especially in a military or civil emergency, or to be organized for this purpose. Some studies in Nigeria argue that there is need to increase the tempo of investment that would lead to higher growth rate as is the case with Asian tiger to register in creased growth and development in Nigeria.
Soludo 1998, Ebajemito et al. 2004, world bank 2007, states that Nigeria’s investment/Gross Domestic Product (GDP) ratio which average 22.9 percent in 70’s, 16.5 percent in 80’s, 19.8 percent in 90’s is averagely below the benchmark of international investment GDP ration of 20 percent that is believed to propel an economy to the path of growth and development Usman 2007, though 23 percent on the average was attained in 200 – 2005 but drastically reduced to 12.5 percent in 2006. For instance investment GDP has never gone below 20 percent in some Asian countries like China, Korea, Malasia, Singapore and Thailand with 30.5 percent 28.4 percent, 22.9 percent, 40.5 percent, and 25.8 percent respectively, in the 70’s while in the 80’s it was 36.2 percent, 30.4 percent, 27.8 percent, 42.5 percent and 29.5 respectively. 39.1 percent, 35.4 percent, 36.5 percent, 35 percent, 27.8 percent, and 36.3 percent respectively in 90’s while averagely it is 39.6 percent, 30 percent, 23..2 percent, 22.9 percent and 25.7 percent respectively for 2000 – 2005 (World Bank 2007).
Under the present economic dispensation, the companions or the drive for savings deposit has been stepped up by banks and non-bank financial institutions in Nigeria.
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, premium savings bonds play any a minor rate, banks and non–bank financial Institutions are today competing strongly among them instruments including additional frame benefits almost banks are now offering contractual forms of savings aimed at persuading depositors to invest in long term deposits. It is however not sufficient because the range and type of financial assets available are equally important. There is a wide range of savings instruments offered by banks and non-financial institutions in Nigeria today.
Another area some banks are foreseeing to mobilize funds today is the montage saving: because large number of Nigerians need accommodation of their own but find it difficult with their major income. Interest payment a demand deposits accounts has also some positive impact on the propensity to save. Bank have also been allowed by the government to open domeliary account for Nigerian exporters in which proceed of experts 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 reacting the age of retirement.
Conversely the crisis of confidence in our banks is a great set back 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 bank in the country were the character of currency store house. But because of the lack of confidence in banks today, sizeable amount of Nigerians keep their currency or cash at home and this marks of most of cash unpaired by the banks.
This winders the financial intermediaries function of intermediation. Most of our industries depend on commercial bank assistance in form of overdraft, short term and long term loans for effective operation.