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Abstract

One of the most controversial areas in macroeconomics is the saving-growth nexus. This study is an attempt to examine this relationship in the case of Nigeria. Time series data over the period 1981 to 2020 were used. The analysis was based on Augmented Dickey-Fuller (ADF) test, Johansen cointegration test, Dynamic Ordinary Least Squares (DOLS) technique, and Pairwise Granger Causality tests. The results of the DOLS estimation techniques for cointegrating regression show a positive relationship between gross domestic savings (InGDS) and gross domestic product growth (InGDP) (economic growth) in the long run. The results supported the neoclassical viewpoint that saving rate is positively or directly related to the Gross Domestic Product. However, the Pairwise Granger Causality Tests showed no causality between InGDS and InGDP. Nonetheless, policy makers in the country need to stimulate savings the more in order to further increase economic growth. They should encourage the integration of the formal and informal sectors as this would have a strong positive impact on domestic savings. This will deepen the financial sector and assist in mobilizing the much needed savings that will engender investment and growth in Nigeria. In the same vein, policies should be pursued to reduce real interest rate so as to increase private sector investment.