Determinants of savings, private investment and economic growth in Nigeria (1981-2015).
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Date
2019-11
Authors
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Publisher
Kampala International University, College of Economics and Management
Abstract
The Nigerian economy is at crossroads manifested through rising unemployment
rates and low GDP growth rates as well as low investment cum savings rates. Hence
the study sought to determine the effects of some macroeconomic variables on
domestic savings, private investment and the economic growth of Nigeria during the
period of 1981-2015. To achieve the stated objectives of the study, domestic
savings, private investment and economic growth models were formulated on the
basis of functional linear relationships with the identified predictor variables. The
fitted multiple linear regression models adopted the ordinary least squares (OLS)
techniques of data analysis, and the mix stationarity of the time series data sets of
the growth, savings and investment models informed the decision to apply the
autoregressive distributed lags (ARDL) methods of data analysis for these models.
The study relied on secondary sources of time series data obtained mainly from
Central Bank of Nigeria, National Bureau of Statistics and National Population
Commission for the formulated multiple regression models. The outcome of the
empirical investigations for the Growth Model evinced that there were direct positive
relationships between economic growth and the regressors namely gross domestic
savings, foreign direct investment, private domestic investment and human capital.
But the results established an inverse relationship between economic growth and
population growth rates. Also, the bound tests indicated the existence of a long-run
relationship between growth and the predictor variables. Besides, the multiple
regression results of the Private Investment Model revealed a strong evidence of
statistically significant inverse relationship between private investment and interest
rate as well as statistically significant positive relationship between inflation rate and
private investment. However, capacity utilization and nominal exchange rate had
statistically insignificant positive and negative relationships respectively with private
investment. And the bound tests indicated the existence of a long-run relationship
between investment and the explanatory variables. Furthermore, for the Savings
Model, the results indicated that gross domestic savings had a significantly positive
and negative relationship with deposit interest rate and inflation rate respectively.
But there was a linear insignificant positive relationship between gross domestic
savings and real GDP per capita and population growth rate. Also, the bound tests
indicated the existence of a long-run relationship between savings and the
independent variables. In essence the study provided a better and broad
understanding of the determinants of savings, private investment and economic
growth in Nigeria. The study also recommended among others that government
should resuscitate the productive base of the economy through appropriate
monetary, fiscal and exchange rate policies to improve the economy’s capacity to
achieve the desired level of economic growth. Industrial capacity utilization should
also be improved to bolster the contribution of the manufacturing sector to the GDP,
and also incentives be provided to both domestic and foreign investors by
government for the subsistence of firms and businesses and raise the
investment/GDP ratio to the level recommended by the World Bank. Also
government should encourage rural and semi-urban development of the banking
sector for effective savings mobilization and financial intermediation so as to
enhance investment opportunities and provide more credit facilities to the economy.
Description
A dissertation submitted to the College for Higher Degrees and Research, in fulfillment of the requirements for the award of the Doctor of Philosophy (Ph.D.), In Economics, Kampala International University, Uganda. November, 2019.
Keywords
Savings, Private investment, Economic growth, Nigeria