Journal of Finance and Bank Management

Empirical Investigation of the Impact of Deposit Rates on Fund Mobilization by Deposit Money Banks in Nigeria
Ogbulu, Onyemachi Maxwell; Uruakpa, Peter Chinyere; Umezinwa, Chizoba Lynda

Abstract
The objective of this paper is to investigate the nature of the relationship between deposit rates (disaggregated into various categories of deposit rates charged by DMBs in Nigeria) and deposit mobilization in Nigeria within the period 1981 and 2012 using annual data collected from the Statistical Bulletin published by the CBN. Using the OLS multiple regression, unit root tests, co-integration, error correction mechanism (ECM) and Granger causality tests, the empirical results report no significant relationship between all categories of deposit rates and total deposit liabilities of DMBs in Nigeria. The same results were also obtained with respect to the impact of deposit rates on time, savings and foreign currency deposits. In addition, the paper found no granger causality relationship between deposit rates and deposit liabilities. It is therefore recommended that a policy of interest rate liberalization alone may not be enough to induce higher levels of fund mobilization. The government should pursue programmes aimed at boosting investment and growing the economy to increase incomes that would release further savings for sustainable growth.

Full Text: PDF     DOI: 10.15640/jfbm.v3n1a8