Monetary Policy Regime Shift and the Dynamics of Domestic Savings in Nigeria: An ARDL Approach across the MRR–MPR Transition

Understanding how interest-rate reforms influence domestic savings remains central to effective monetary policy design in developing economies. This study investigates the dynamic relationship between policy-driven interest rates and total savings in Nigeria from 1981 to 2023, covering the transition from the Minimum Rediscount Rate (MRR) to the Monetary Policy Rate (MPR) regime. Using annual time-series data from the Central Bank of Nigeria and applying Augmented Dickey–Fuller (ADF) unit-root tests, Autoregressive Distributed Lag (ARDL) modeling, and structural-break interaction analysis, the study quantifies short- and long-run effects of policy rate, treasury-bill rate, and deposit rates on gross savings. Results show that under the pre-2006 MRR regime, both the policy rate and short-term deposit rate exerted significant positive effects on savings, consistent with the interest-inducement hypothesis. However, in the post-2006 MPR period, the relationship weakened and partially reversed, suggesting a structural break in monetary transmission. The findings imply that while financial liberalization enhanced the savings base, subsequent reforms reduced the sensitivity of savings to interest-rate adjustments. Policymakers should therefore strengthen transmission mechanisms, expand financial inclusion, and stabilize real returns to sustain savings-led growth.