The Luxury of Saving

Apr 19, 2017|Olanrewaju Rufai

One cliché that Nigerians seem to love is “saving for the rainy day”, an expression used to convey how important it is to save. From a young age, children are encouraged to keep money in piggy banks or “deposit” monetary gifts with their parents. Across generations and social strata, saving is encouraged.

Savings help you acquire valuable assets, provide financial security, and improve your standard of living. And in a country like Nigeria, financial security is particularly crucial. Saving provides a financial buffer in the event of inevitable crises such as job loss, medical emergencies, financial emergencies, etc.   

On an aggregate level, savings are a veritable tool for economic growth and development. In particular, savings allow the necessary investment to improve a country's capital stock and its long-run growth trajectory. It also helps speed up economic recoveries – countries with high savings rate climb out of recessions faster than those with low savings rate.

Given all of these benefits, it is surprising to find that Nigerians do not save as much as is believed.  Not only does data reveal that Nigerians are one of the lowest savers globally; when compared to other countries, Nigeria’s poor savings culture comes to the fore. According to the International Monetary Fund, the gross savings rate in Nigeria* stands at 15%, far below China at 49% and even below the savings rates in South Africa and Angola. 

This discrepancy between the Nigerian attitude towards savings and our actual actions begs the question – why do Nigerians fail to save?

There are several factors responsible for our poor savings culture. The most significant is poverty, closely linked to low income and unemployment. Many Nigerians willing and able to work are unemployed, thus do not earn any income and are unable to save. To worsen the situation, the minority who work are overburdened. The overdependence of a large proportion of the population on the small workforce limits the ability of workers to take care of their basic needs, thus relegating saving to the background. For example, a fresh university graduate earning ₦40,000 each month has little left to save after deducting rent and living expenses. Therefore, perhaps a more accurate description of the situation would not be that Nigerians fail to save, but that few people in Nigeria have the ‘luxury’ of saving.

Another relevant factor is the level of banking services penetration. Again, according to the World Bank, less than 44% of Nigerian adults have bank accounts. As banks are the most popular medium for saving, it is not surprising that the number of Nigerians who do not save is close to the number of unbanked Nigerians. More so, the lack of banks in rural areas has impeded savings, credit facilities and in turn, income generation in the rural areas and acquisition of credit facilities for investment. Regarding banking penetration, this is mixed in with low levels of information. Even in urban areas where banking services are available, information about savings mechanisms is scarce.

On a socio-cultural dimension, it can be argued that Nigerians typically have a low level of long-term orientation, which might explain our relatively low propensity to save. This is perhaps explained by the tendency to live for the moment and splurge after ‘hammering’. There are many reasons for this outlook. One of which is the scarcity of financial planning information and savings advice. Perhaps more influential is the societal expectation of celebrating any form of financial success with copious material acquisitions, rather than long-term investments. The paradox is that perhaps, a contributing factor to the high poverty rate in Nigeria can be attributed to the mismatch between our propensities to save and consume.

Other factors which contribute to the poor savings culture include a lack of incentives, distrust of financial institutions and a general risk-averse nature.

The Federal Government has implicitly acknowledged this pervasive poor saving culture and has taken steps to rectify the malaise with the issuance of the FGN Savings Bonds. The bonds, it is hoped, will help to stimulate and deepen the savings culture among households and encourage financial inclusion across the social and economic strata. However, it remains to be seen how the policy fares in the long term.

Given the benefits of savings on personal financial independence and national economic development, the need to save cannot be overemphasised. In truth, we are probably still at the stage where though many people want to save, they simply do not have the luxury to do so. 


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The data on savings rates in Africa was amended on September 18th, 2018. The article previously stated Ghana and Liberia have higher savings rate than Nigeria. This is incorrect.