Assessment of the relationship among Saving, Foreign Direct Investment, Capital Formation and Economic Growth in Nigeria

This study explored the relationship between domestic saving, foreign direct investment, capital formation and economic growth in Nigeria using time series data from 1988 to 2023. This work applied various econometric and statistical methods ranging from unit root test, co-integration test, to vector error correction mechanism to determine the relationship that exists between capital formation and Nigerian economy. It is being discovered that, based on VECM result that the variables in question are not contrary to economic a priori. It is imperative that, the interactive effect of domestic saving and foreign direct investment has a positive impact on the relationship that exists between capital formation and Nigerian economy. Other variables of human capital and export do affect Nigeria’s economic growth in a positive way, while inflation, interest rate and import are inversely related to Nigeria’s economic growth. It is recommended, based on empirical result that, there is a need for Nigerian government to raise its expenditure to provide more infrastructural facilities that include good roads, hospitals, schools, industrial estates, portable water and uninterrupted power supply among others. Provision of these mentioned infrastructural facilities will serve as an incentive for foreign and domestic investors to invest more in the country so as to reduce the level of poverty, unemployment, income inequality and high cost of living.