SAVINGS, INVESTMENT AND ECONOMIC GROWTH IN SUB SAHARAN AFRICAN COUNTRIES

ABSTRACT

The study investigates the interrelationship among domestic savings, investment and economic growth in Sub-Saharan Africa countries for a period of forty (40) years (1981 to 2020). The sampled countries for the study in the Sub Saharan Africa are Nigeria, Kenya and South Africa. The cointegration technique and the error correction model (ECM) were employed in the analysis of the data. Preliminary tests such as the unit root tests were conducted both in levels and at first difference in order to ascertain the stationarity status of the data. The empirical findings revealed that domestic savings, domestic consumption and inflation rate are the major significant factors affecting economic growth in the Sub-Saharan Africa both in the short run and in the long run. They were found to have significant positive relationship with economic growth in the Sub-Saharan Africa. On the other hands, domestic investment and interest rate have insignificant negative relationship with economic growth in Sub-Saharan Africa; suggesting that the variables do not play significant role in the determination of economic growth in the sub region during the investigating period. With respect to Granger Causality, the result found a unidirectional relationship, that is, causality flows from RGDP to consumption (CONS). The study recommends that among others that, respective governments in the sub region should create enabling environment for domestic investment to rise through the adoption of macroeconomic policies that will boost investment opportunities in the sub region. This will definitely go a long way to ensure that domestic investment has the much needed positive impact on economic growth. Also, governments and investors should not base their investment decisions in the sub region only on macroeconomic variables. Rather, they should seek ways to balance their approach to economic activities and market watching by combining economic factors with core market indicators such as domestic savings and domestic consumption in order to ensure constant economic growth in the sub region.