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This paper empirically investigates the determinants of private savings and private
investment in Nigeria.The study also examines the direction of causality between savings
and investments and tests the existence of structural breaks on savings and investment
process in Nigeria. The study adopted linear regression models, granger causality model,
and dummy regression models to address the objectives. The empirical results show that
real disposable income and real interest rate are positively related to private savings in
Nigeria. Also previous savings and inflation are found to be significant determinants of
private savings in Nigeria. Furthermore, previous investment, interest rate and real
exchange rate are found to be significant determinants of investment in Nigeria. The
granger causality model shows evidence of independent causality between private savings
and private investment in Nigeria. The dummy regression models show evidence of no
significant structural break in private savings and investment within the pre-SAP and post-
SAP periods under review (1970-2010). Given the prevalence of low saving rate and
invariably low investment rate in Nigeria, we recommend that there is the need for
government and monetary authorities to adopt serious income and monetary policy
measures that will enhance savings and investment in Nigeria. This can also be achieved by
enhancing people’s real income through provision of jobs, savings attitude re-orientation
and making the economic environment more investment friendly.
