CHAPTER ONE

1.0          INTRODUCTION

1.1          Background to the Study

The economy of Nigeria advanced at 2.4% in the last quarter of 2018, following a 1.8% expansion in the previous period and beating market expectations' gain of a 2.1% (NBS, 2019). Despite this gain, 86.9 million Nigerians are still living in extreme poverty which is nearly 50% of its estimated population (Yomi Kazeem, 2018)

The fight against poverty has been a central plank of development planning in Nigeria since independence. Observers have unanimously agreed that successive governments' interventions have failed to achieve the objectives for which they were established

It is universally acknowledged that the micro-finance institutions (MFIs) play a catalytic role in the progress of economic growth and development (Alalade et al., 2013). This is due to the fact that banks are a veritable instrument for mobilizing resources for investment purposes. The importance of microfinance to eradicating poverty made the Federal Government of Nigeria adopt it as its main source of poverty reduction in Nigeria and mandated the Central Bank of Nigeria to develop an appropriate policy and framework for the operations of Microfinance Institutions (MFIs).

Three features distinguish MFIS from other formal financial institutions. These are (i) the smallness of loans advanced and/or savings collected, (ii) the absence of asset-based collateral, and (iii) simplicity of operations. The former Governor of the Central Bank of Nigeria, Chief (Dr) J.O.Sanusi in a paper delivered at the Banking and Financial Symposium, organized by the Commonwealth Business Council, London, July 2020, stated there is the need to integrate the various informal savings institutions into the mainstream of the formal financial system to harness resources for development and increase per capita income to reduce poverty in the country. This is because in many developing countries, more capital is held in the informal economy than the formal economy. A large part of this capital is held in small amounts by those living near or below the poverty line. These numerous small capital holdings can be brought into the formal sector to provide the poor households with savings services that can meet their needs and be made readily accessible to them.

The problem of poverty in Africa has, over the years, engaged the attention of the international community and governmental and non-governmental agencies, including African scholars. Poverty in African countries is massive, pervasive, and chronic, engulfing a large proportion of the society (Uma & Eboh, 2013). In Nigeria, human conditions have greatly deteriorated (particularly in the last decade) with real disposable incomes dwindling and malnutrition rates on the increase. Aiyedogbon and Ohwofasa (2012) emphasized that the situation is more critical considering that, in spite of the vast resources committed to poverty alleviation by every successive administration, no obvious achievement has been accomplished in this direction.

1.2   Statement of the Research Problem

Savings is increasingly being acknowledged as a power tool for poverty reduction, but the peri-urban households, who are mostlylow-income earners, peasant farmers, and small-scale business owners, lack savings because of their low capital income and are not reached by formal banking institutions, nor do these institutions accept very small deposits. 

Successive governments in Nigeria have initiated programs that stressed making credit facilities available to the people for agricultural development but neglected savings mobilization in the areas. The poor savings nature of the peri-urban areas has constituted a major setback to economic activities due to lack of capital formation for investment, which has resulted in continuous poverty. The households employ a variety of ways to generate savings by forming savings clubs, rotating savings, using money lenders, and keeping safe places in the house, but all these have not produced meaningful change in the poverty level of the households, as most of them, if not all, continue at the same level, creating a vicious cycle of poverty.

In every economy, formal financial institutions, aside from their conventional banking activities, are expected to be playing crucial roles in alleviating poverty by making funds available to the rural poor. Unfortunately, formal credit facilities are not adequately available and accessible to thepoor especially around the less developed countries, of which Nigeria is one of them. In Nigeria, these formal credit institutions frown at making funds available and accessible to the poor because of the associated costs involved, which include, but are not limited to, a high rate of loan defaults. Though the government at all levels in Nigeria has been emphasizing much the need for poverty alleviation, hence enunciating policies and designing programs aimed at alleviating poverty, it has been to no avail. On each occasion, there would always be abuse, funds diversion, mismanagement, and mistargeting of the poor populace whom the program is meant for. These programs, if properly implemented, would have gone a long way in uplifting the standard of living of the greater majority of the citizens who are poor. It is lamentable that despite the laudable nature of some of these programs, the benefits have tended to make few people richer while the greater majority whom the programs are meant for are poorer within the same period. Sequel to all these, the unbanked households resorted to informal financial settings for their fund needs. It is expected that these informal financial institutions should act as catalysts for economic development and poverty reduction by playing a crucial role of making funds available and accessible to the poor at minimal interest rates. Hence, there is a need for a study that will help evaluate the role that saving mobilization plays in alleviating poverty in the study area.

The need to improve on the poverty status of the financially excluded households has generated many discussions within the academia and various policymakers in Nigeria, but an attempt has not been made to study savings mobilization as an instrument for poverty alleviation.

This study, therefore, intends to improve knowledge on the determinant of household savings mobilization and ways savings are mobilized.

and the incidence of poverty among peri-urban households in the study area. In doing this, the following research questions were addressed.

i.       What are the socio-economic characteristics of households in the study area?

ii.     What are the savings mobilization strategies adopted by households?

iii.   What are the determinants of saving among the households? iv. What is the poverty status among the households? 

v.     What is the effect of households’ saving on poverty status?

vi.   What are the constraints to saving among peri-urban households in the study area?

1.3 Objective of the Study 

The broad objective of this study was to analyze the savings mobilization and poverty alleviation of the peri-urban households in the Bwari and Kwali Area Councils, Abuja. 

The specific objectives were to:

i.       describe the socio-economic characteristics of peri-urban households in the study area; ii.        identify the savings mobilization strategies adopted by households; iii.   estimate the determinant of saving among   households; iv.         determine the poverty status of the households;

v.               determine the effect of households’ saving on poverty status;

vi.              identify the constraints to saving among peri-urban household in the study area;

1.4 Hypotheses of the Study

i.           Households’ socio-economic characteristics such as age of household head, secondary educational qualification, membership of association, gender, etc. have no significant influence on saving mobilization.

ii.         Savings mobilization has no significant effect on household's poverty status.

1.5 Justification of the Study

Nigerian governments have initiated different poverty alleviation programs, yet the outcome has not been as expected (Girei et al., 2013).   In May 2013, the World Bank economic report on Nigeria indicates that the poverty level is increasing rapidly. The statistics of the population of Nigerians in abject poverty released by the National Bureau of Statistics (NBS) were about 112 million Nigerians (National Bureau of Statistics 2013). The figure represents about 67% of the entire population and that the scourge will continue to increase if not addressed (World Bank, 2013). The Federal Capital Territory (F.C.T.) has many suburban settlements and villages that have no access to banking facilities to save funds or access credit for the expansion of their enterprises.

So, saving mobilization is relevant in encouraging savings among rural households for the expansion of their investments.

The understanding of the households’ savings behavior is pivotal to designing policies to promote savings (Muradoglu and Taskin, 1996). Hence, understanding households’ savings in the Federal Capital Territory (FCT) will assist extension agents, formal and informal financial institutions, and the governmental and non-governmental organizations to find appropriate ways of assisting rural households to improve their savings culture. Also, with an appropriate financial institution to save and mobilize their funds, households will be able to attain self-sufficiency. Also, through the findings and recommendations of this research work, a greater awareness will be created in the financial sectors which will assist in formulation and evaluation of policies that will bring banking facility to the areas for savings and access credit for investment that will subsequently lead to more income which will improve the well-being of the peri-urban households.