Does Interest Rate Really Stimulate Savings in Nigeria?

Babalola, Abdurrauf; Abdul, Abiodun Ibrahim

doi:10.2478/foli-2022-0017

Abstract

Research background: Interest rate as a stimulus to savings has been discussed by many scholars while ancient scholars kicked against the collection of usury (interest). Developing countries like Nigeria may not be stimulated with the rate of interest because of its insignificant level, which is presently causing financial exclusion against the opponents of interest.

Purpose: This study examines whether interest rate really stimulates savings in Nigeria.

Research methodology: The study covers the post-liberalization period between 1987 and 2021. The research employs the Vector Autoregressive/Error Correction techniques to analyze the data and make statistical inferences.

Results: The results of the show that interest rate (deposit rate) has a positively non-significant effect on savings in Nigeria. On the contrary, the Treasury bill rate, Insecurity and Inflation rate have a significant impact on savings in Nigeria.

Novelty: No existing study has been made to investigate if the interest rate (deposit rate) has the ability to stimulate domestic savings in the Nigerian economy. None has included the Insecurity index and none has used the vector autoregressive error correction tools to analyze this inquiry so “Does Interest Rate Really Stimulate Savings in Nigeria?

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Does Interest Rate Really Stimulate Savings in Nigeria?

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