ECO 512: PRIVATE SAVINGS AND PRIVATE INVESTMENT IN NIGERIA: WHAT DETERMINES WHAT AND WHAT CAUSES WHAT?

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.