Dynamic Interaction Between Private Savings, Public Savings and Economic Growth in Nigeria

The paper set out to examine the relationship between private savings, public savings and economic growth in Nigeria from 1970 to 2015. To carry out this investigation, the researcher employed Johanson cointegration test combined with the vector error correction model Wald Granger causality. The results of the analysis revealed the existence of cointegration among economic growth, private savings, public savings, and efficiency in the economy. Precisely, private savings rate have positive effect but insignificant effect on economic growth rate in the longrun, while public savings rate have negative but also insignificant effect on economic growth. Granger causality test reveals that there was bidirectional causality between private savings and economic growth and also between public savings and economic growth. Policy makers should be conscious of this fact, especially when projecting short, medium and long term expenditure of government. A budget proposal whereby the recurrent expenditure is significantly high will increase private income, while a reduction in all form of private and corporal taxes will enhance investment and thus promote economic growth. The government should therefore focus on development of infrastructural facilities to reduce the costs of doing business as well as increase the profitability of firms, thereby raising the economy's production of goods and services.