An Evaluation of the Effect of Interest Rates on Consumer Savings Behavior: A Case Study of First Bank, Niger State.
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Background of the Study:
Interest rates are a critical determinant in shaping consumer savings behavior, influencing the attractiveness of depositing funds versus spending or investing them elsewhere. In the context of First Bank in Niger State, fluctuations in interest rates have a profound impact on the saving habits of individuals, particularly in an economy where inflationary pressures and economic uncertainty prevail. Higher interest rates generally incentivize savings by offering greater returns on deposits, while lower rates may discourage savings, prompting consumers to seek alternative investment avenues (Adebowale, 2023). This study examines how the bank’s interest rate policies interact with consumer perceptions and saving decisions. First Bank’s strategic adjustments in interest rate offerings are designed not only to attract deposits but also to ensure liquidity and competitive positioning in the retail banking sector. As consumer confidence in the banking system is partially influenced by the expected returns on savings, understanding the interplay between interest rate levels and consumer behavior becomes essential (Okeke, 2024). Moreover, economic theories suggest that savings behavior is also moderated by factors such as income levels, risk preferences, and macroeconomic stability. In Niger State, where socio-economic disparities are prevalent, the effect of interest rate changes on savings behavior may differ across various demographic segments. The bank’s efforts to maintain competitive interest rates are critical in not only fostering individual financial stability but also in contributing to broader economic growth. This study will therefore provide a critical evaluation of how changes in interest rates affect consumer saving behavior at First Bank, considering both microeconomic and macroeconomic dimensions. The analysis will draw on recent trends in banking policies and consumer responses observed between 2023 and 2025, offering insights into the efficacy of interest rate adjustments as a tool for encouraging savings (Ibrahim, 2025).
Statement of the Problem:
Despite the theoretical advantages of higher interest rates in promoting savings, First Bank in Niger State faces challenges in translating these policies into increased consumer deposits. Fluctuating economic conditions, coupled with inconsistent consumer confidence, have led to mixed responses regarding saving behavior. Some customers remain reluctant to save due to concerns about inflation eroding the real value of their deposits, while others are influenced by alternative investment opportunities. Furthermore, the heterogeneity in income levels and financial literacy among the population complicates the direct impact of interest rate adjustments on savings behavior (Chinwe, 2023). The gap between policy intent and actual consumer response is further widened by market competition and emerging digital banking alternatives that offer innovative saving products. Consequently, despite First Bank’s efforts to offer attractive interest rates, the expected increase in savings is not uniformly observed across different customer segments. This study aims to identify the underlying factors that limit the effectiveness of interest rate policies in boosting consumer savings and to propose strategies that can bridge the gap between banking policy and consumer behavior. Additionally, the study will investigate whether external economic variables such as inflation, unemployment, and macroeconomic volatility dilute the influence of interest rates on savings (Olaitan, 2024).
Objectives of the Study:
• To evaluate the relationship between interest rate levels and consumer savings behavior at First Bank.
• To identify socio-economic factors that moderate the impact of interest rate changes on savings.
• To propose policy recommendations for optimizing interest rate strategies to enhance savings.
Research Questions:
• How do changes in interest rates influence the saving behavior of consumers at First Bank?
• What socio-economic factors affect the responsiveness of consumers to interest rate adjustments?
• How can First Bank optimize its interest rate policies to encourage higher savings?
Research Hypotheses:
• H₁: Higher interest rates significantly increase the propensity to save among First Bank’s customers.
• H₂: Socio-economic factors such as income and financial literacy moderate the effect of interest rate changes on savings behavior.
• H₃: Strategic adjustments in interest rate policies can lead to a measurable improvement in consumer savings.
Scope and Limitations of the Study:
This study focuses on the impact of interest rate changes on consumer savings behavior at First Bank in Niger State. It encompasses both urban and semi-urban areas and relies on survey data and secondary financial records. Limitations include potential biases in self-reported data and the influence of external economic factors not fully controlled in the study.
Definitions of Terms:
• Interest Rate: The percentage charged on savings or loans, affecting the cost of borrowing and the return on deposits.
• Consumer Savings Behavior: The pattern of depositing funds into financial institutions influenced by economic and psychological factors.
• Financial Literacy: The ability to understand and effectively use financial services and products.
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