Analysis of Savings and Private Capital Formation in Nigeria

Abstract

The study investigates the relationship between private capital formation and savings in Nigeria between 1982 - 2014. It employs the ordinary least squares technique, cointegration and the error correction mechanism which minimizes the possibility of estimating spurious relations while retaining vital long run information. Research findings show that capital expenditure and inflation rate exhibit negative and insignificant effects on gross fixed private capital formation, with savings having a negative and significant effect. FDI, RGDP and Prime lending rate all revealed to have a positive and significant effect on gross fixed private capital formation with the previous value(s) of gross fixed private capital formation having a positive and significant effect on the present value(s). The study recommends, among other things, the encouragement of savings culture and creation of an enabling environment for investment to thrive.

Keywords: Savings, Investment, Growth, Inflation.