Macroeconomic Determinant of Domestic Savings in Nigeria: A Cointegration Approach

Abstract The crux of the study is to succinctly identify and examine the macroeconomic determinant of domestic savings in Nigeria. Historical time series data were collated from CBN, NBS, and IMF bulletins for the period 1990 to 2019. The data were tested and analyzed using the unit root test, Johansen co-integration test, and ECM regression technique. The outcome of the ADF unit root test shows that the variables were stationary while the empirical results for Johansen co-integration test conclude that there exists a long-run relationship between the variables. From the ECM regression result, deposit rate and inflation rate in Nigeria negatively and insignificant affect domestic savings in Nigeria. While income level was revealed to have a positive and significant impact on domestic savings in Nigeria. Albeit, financial deepening negatively affect domestic savings in Nigeria but the effect was statistically significant. Conclusively the study shows that the level of income, deposit rate, financial deepening, and inflation rate determines the volume of domestic savings in Nigeria – positively or negatively. It was recommended among others that the government and monetary authorities should set sound policies and a fertile environment to foster domestic savings that will help to increase the level of economic growth in Nigeria. Keywords: domestic savings, financial deepening, financial stability, economic growth