Revalidating Saving-Investment Comovement in Nigeria: Surprises, Stylized Facts and Explanations

Abstract

Numerous studies have attempted to examine the relationship between savings and investment without a consensus conclusion. Interestingly, there have been profound findings, arguments and scholarly contributions on the subject by different authors, researchers and scholars from most first class institutions around the world. To further heighten the argument around the subject, Feldstein-Horioka in his hypothesis, after running many regression, suggests that saving-investment co-movement under perfect capital mobility remains a puzzle. This paper therefore proposes a reconciliation model to revalidate the co-movement between savings and investment using the dataset sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin between 1981 and 2017. The approach employed followed the Autoregressive Distributed Lag (ARDL) and Granger Causality that presumed economic variables reactions are not instantaneous and effects require a feedback mechanism delay for some period. The results suggest the existence of strong positive correlation between national savings and business investment, proposing that policies/initiatives to increasing the domestic resource mobilization through national saving are crucial for stimulating rate of investment in Nigeria.

The Feldstein–Horioka hypothesis for African countries: Evidence from recent panel error‐correction modelling

“…Slimane, Tahar, and Essid (2013) employed the Engel and Granger cointegration procedure for Tunisia and Morocco where the significantly different from zero and negative ECT indicate the adjustment speed of investment and savings ratios in the long run. Similar results are reported in Mitra (2017) for South Africa and Joseph and Shobande (2018) for Nigeria. The values of ECT in previous studies, which are estimated by employing different cointegration procedures, provide results of lower value of the ECT compared to this study.…”

A Multivariate VAR Model for Evaluating Sustainable Finance and Natural Resource Curse in West Africa: Evidence from Nigeria and Ghana

“…Thus, it is unclear whether access to finance can help these two countries better reposition their resources. Secondly, studies have shown that access to finance is important to escape the vicious cycle of poverty for countries rich in resources and to address their socioeconomic woes [16,28,29]. For example, oil exploration has turned Nigeria's agricultural society into an oil-producing oil nation, but not without infrastructural deficits or slow socioeconomic development.…”

Mechanics of Investment Drivers in Chinese Economy

“…Lately, access and use of financial services have not only become paramount but also the hallmark of various campaigns among stakeholders and scholars. While the peculiarity of savings is critical, literature agreed that both savings and investment are share of income, but less agreement exist on whether savings and investment are really equal at equilibrium (Joseph & Shobande, 2018).…”