The research work studied the national savings and Nigerian economic growth, spanning from 1970-2007. The study adopted Ordinary Least Square (OLS) single equation model. Using time series data over the period, the work shows that National Savings is not significant at SY level and it granger causes real gross domestic product. The study also shows that exchange rate is significant in its contribution to economic growth. The investment as one the of explanatory variables is significant and supports the idea that most of the investments in Nigeria are not from savings. The study also reveals that money supply has no impact on Nigeria’s economic should increase national savings through increased interest rate on deposits and also maintain its managed floating exchange rate policy.
TABLE OF CONTENT
Title page i
Approval page ii
Table of content
- Background of the study
- Statement of the problem
- Research hypothesis
- Justification of the study
2.1 Theoretical Literature
2.2 Empirical literature
2.3 limitations of the previous studies
3.1 Model specification
3.2 Estimation procedure
3.3 Techniques for evaluation of the result
3.3.1 Evaluation based on economic criteria
3.3.2 Evaluation based on statistical criteria (first order test)
3.3.3 Evaluation based on economic criteria (second order test
3.4 Data source
4.1 Presentation of regression results
4.2 Evaluation of results
4.2.1 Evaluation based on economic criteria
4.2.2 Evaluation based on statistical criteria (first order test)
4.2.3 Evaluation based on econometric criteria
5.1 Summary, Policy Recommendation and Conclusion
5.2 Policy recommendation
- BACKGROUND OF THE STUDY
Saving naturally play an important role in the economic growth and development process. Savings determine the national capacity to invest and thus to produce, which in turn, affect economic growth potential. Low saving rates have been cited as one of the most series constraints to sustainable economic growth. Growth models developed by Romer (1986) and Lucas (1988) predict that higher savings and the related increase in capital accumulation can result in a permanent increase in growth rates.
The close relationship between the savings rate of the economy and the economic growth is stylized feature which has been well documented in number empirical investigations. This is result which has been found in several sensitivity analysis in the although it is emphasized that causality should be inferred from this positive growth literature, example, Leveine and Renelt (1992) and Sala-i-Martin (1997). Contemporaneous correlation. The close connection between saving and growth has also been a key finding in the empirical saving literature; the possibility that country differences in saving rates could be explained by differences in growth rate recognized early.
Modern saving theories indicate that the rate of growth in aggregate real income is an essential determinant of the national saving rates. Rapid growth raises the saving rate. Higher national saving then release resources for the investment needed to sustain high growth. If investment is discourage the growth rate fall as does the saving rate. In the case of Nigeria, prior to the Structural Adjustment Programme (SAP) in 1978; there had been a major disequilibrium in the external sector from large current account deficit and capital inflows. The balance of payment problems result from the high saving and investment gap in Nigeria as we saw during SAP.
- STATEMENT OF THE PROBLEM
In Nigeria, prior to Structural Adjustment Programme (SAP) in 1987, there had been a major disequilibrium in its external sector from large current account deficit and capital inflows. The balance of payment problems resulted from the high saving investment gap. National saving as a percentage of Nigeria GDP which was 6.1% between 1973 and 1985 was inadequate to finance domestic investment, which accelerated to 20.5% during the same period. There was a sizeable saving-investment gap of 14.4%of GDP between 1973 and 1985 (Adebiyi, 2001).
After the SAP, the saving rate in Nigeria increase significantly from 6.1% of the GDP between 1973 to 1985 to 11.7% of GDP between 1994 and 1998. This was reflect in the growth rate of real GDP, which rose 1.5% between 1973 and 1985 to 2.7% between 1994 and 1998 (Adebayo, 2001). This shows a relationship between saving rates and economic growth. On the other hand, the inability of bank and financial institution to make provision for more soft loans to Nigerians, encourage small and medium scale enterprises, provides funds for the teeming number of unemployed youths to engage in meaningful economic activities, then saving may never lead economic growth in Nigeria. This problem of instability in saving rate would lead to low investment and low output which will in turn lead to high demand of imported goods. This will cause disequilibrium in Nigeria external sector as we saw during SAP period. Based on the fore going analysis. Therefore the following research question can be deduced.
- Is there a long run relationship between saving and economic growth in Nigeria?
- Is there casualty between saving and economic growth?
This research we as much as possible answer the questions above.