Interest Rates Dynamics And Saving Mobilisations In Nigeria: 1987-2015

Financialrepression has been identified to impose ceiling on deposit and lending nominal interest rates at a low level relative to inflation. This often results in low or negative interest rates that discourage savings mobilization and channeling of mobilized savings through the financial system.The paper thus examined the effect of interest rates dynamics on savings mobilization in Nigeria between 1987 and 2015 using a restricted Auto Regressive Distributive Lag (ARDL) model. Break-point unit root test was carried out to test the stationarity levels of the variables before conducting the regression analysis to avoid spurious regression results. The co-integration results showed that long-run equilibrium relationship exist among the variables used for the analysis;while the coefficient of the speed of adjustment revealed that once there is disequilibrium in the system, it takes an average speed of 58.07percent to adjust itself back towards long-run equilibrium level. Findings from the study therefore revealed that maximum lending rate (MLR) has adequately enhanced optimal saving mobilization within the period under study. This was in-line with interest rate spread(IRS) which was also found to have a significant effect on saving mobilizations. However, the Minimum rediscount rate (MRR) and gross national income did not adequately enhanced savings mobilizations within the period under review. Suggestive from the analysis therefore is that there is the need for monetary authorities to embark on routine efforts aimed atreducing the widened gap between gross national income and savings rates to foster a moderate rise in nominal interest rates that would enhance adequate savings deposits. Focus should also be made on ways of reducing the abysmally high rediscount rates ofdeposit money banks so as to encourage savings.