Impact of Bank Density on Domestic Savings in Nigeria

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Abstract

This study examines the long run and short run effects of bank density on changes in domestic savings in the Nigerian economy within the period of 1981-2018. A simple model of domestic savings was formulated and estimated using the Autoregressive Distributed Lag (ARDL) technique as suggested by the stationarity tests of the variables. The results of the analysis showed that positive and statistically significant relationship exists between domestic savings and per capita income growth rate, as well as with real interest rate. Though statistically significant, a negative relationship exists between bank density and domestic savings, 
indicating an increase in the number of banks and their branches reduces bank density and thus increases domestic savings in Nigeria. Per capita income was however found to be statistically insignificant in the determination of domestic savings in Nigeria within the study period. We recommended that monetary policy direction should encourage the establishment of more banks and more branches of the existing banks both within the urban and rural areas and that the supervisory body should ensure that the banks are complying with the operating rules and regulations of the banking system so as to have strong, viable and sound banks, 
ensure peoples’ confidence and trust, and mobilize more domestic savings in Nigeria.