CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

It is universally acknowledged that the banking including play a catalytic role in t he process of economic growth and development.  This acknowledgement is reinforced by contemporary conceptualism to the effect that banks are a veritable vehicle for mobilizing resources from su7plus units and tempting same to deficit unit. Banks constitute perhaps the most important segment of the financial market and played and a dominate vote in not mobilizing savings, but also allocating them for investment purposes.

        In Nigeria, domestic savings rate is relatively low compared to most other developing counties with the same for capital income level. In the past, investment rates were high and hence there was no problem for raising funds.

        Under the present economic dispensation, the companions or the drive for savings deposit has been stepped up by banks and non- bank financial institutions. It is Hoover not sufficient because the range and type of financial assets available are equally important. There is a wide range of saving instruments offered banks and non – bank financial institutions in Nigeria today.

        However, most of the voluntary and non – contractual financial savings consist of savings and time deposit. Although other types of deposit such as savings certificate, premium savings bonds play any a miner rate, banks and non – bank (Moncial Institutions are today competing strongly among them instruments including additional frame benefits  almost banks are now offering contractual forms of savings aimed at persuading depositors to invest in long term deposits.

        Another area some banks are foreseeing to mobilize funds today is the montage saving: because large number of Nigerians need accommodation of their own but fund it difficult with their meager income. Interest payment a demand deposits accounts has also some positive impact on the propensity to save. Bank have also been allowed by the government to open domaliary  account for Nigerian exporters in which proceed of experts can be paid or saved until when they are needed.  Transaction costs related to operating a new accounts and making deposits and withdrawals are now be coming relatively easier particularly for small savers. There is also the pension scheme which seeks to induce depositors to invest small sums of money over a specified period of time in the hope of receiving a stream of benefits upon reacting the age of retirement.

        Conversely the crisis of confidence in our banks is a great set bank for the banking system.  In the past the majority of those who patronized the banks did so in order to find safer place for their money. And for many years bank in the country were the character of currency store house. But because of the lack of confidence in banks today s sizeable amount of Nigerians keep their currency or cash at home and this marks of most of cash unpaired by the banks. According to withstanding et al (1996:133), this one depositors resulting to cash drains. In the broadcast sense a cash drain refers to any kind of cash loss suffered by a bank.

        This winders the financial intermediaries function of intermediation. Most of our industries depend on commercial bank assistance in form of overdraft short term and long loans for effective operation.

STATEMENT OF PROBLEM

Income posses the greatest constraint to savings mobilization. The generally low level of income among the people in Nigeria is a limiting factor to savings mobilization. The inadequate banking facilities in the economy in general and the rural areas in particular also constitute on obstacle to wide savings mobilization.

    Growing frequency of incidences of found, insider abuses and malpractice which all combine in on unholy alliance to erode public confidence in financial institutions and do painful  damage to whatever level of banking habit has been developed.

    Another factor that may affect savings mobilization is the absence of affective a realistic interest rate policy that rewards savers with adequate return on their savings. It  is argued that in as mush as the rate of interested adjusted for inflation various negative. Savings are likely to remain low. Perhaps the greatest problem in this country is that we run a cash economy. The handers the financial intermediaries from performing their functions. The practice constrains banning systems ability to mobilize funds with the consequence that banks create small mount of  deposit in comparison to amount demanded as loan by the economy.