Revising The Savings-Capital Formation Nexus: The Roles of Bank and Nonbank Savings in Nigeria

Abstract

The study investigates the Role of servings-capital Formation Nexus and the role of bank and nonbank domestic savings in Nigeria. The researchers employed advanced econometrics tests to ascertain the impact of bank and nonbank domestic savings on capital formation in Nigeria. The variables used in the analysis were subjected to unit root test to determine whether the variables are stationary or not. Co-integration test was used to determine the long run relationship between capital formation, bank and non-bank domestic servings in Nigeria for the period of 2006-2018. Findings revealed that none of the models was stationary at level but were all stationary at first difference. The results also show that there is a long run significant relationship that exists between the variables (ie all share index, insurance servings and bank total servings)and examined that there is a causal relationship between capital formation and bank and non-bank financial institutions through domestic savings in Nigeria within the period under study. The result also revealed a negative non-significant relationship between domestic savings and capital formation in Nigeria. The study recommends among others that policy formulators in Nigeria need to make some investors’ friendly policies that will encourage, promote and attract more capital inflows and to provide a conducive and enabling environment for the gross fixed capital formation to thrive.

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