Banks Domestic Savings and Capital Formation in Nigeria
Vol.4 Issue 2
This paper re-examined banks domestic savings on capital formation in Nigeria. The objective of the study was to determine the relationship between savings nexus as broken down into different compartmentalization and its resultant effect on capital formation in Nigeria. To achieve this, we adopted the ex post research design to determine how the explanatory variables affects the dependent variable in retrospect. The study further adopted the ordinary least square regression analysis technique to estimate the functional relationship in the model. The empirical results predict that demand deposit has a positive yet insignificant relationship to capital formation in Nigeria, within the period covered in the study, this goes to show that while credit liquidates a society demand deposits due to their nature aren’t focused on middle to long term loans to the real sector, and the regression result found out that savings deposit has a negative and insignificant effect on capital formation, while time deposit has a positive and significant relationship on gross fixed capital formation in Nigeria. We therefore suggest that banks should be more efficient in mobilizing and allocating funds to entrepreneurs in the real sector. The policy implication of this is that regulatory authorities should continue to take measures to liberalize the financial system to avoid any form of shock on the system.
