IMPACT OF DOMESTIC SAVINGS, DOMESTIC INVESTMENT AND FOREIGN DIRECT INVESTMENT ON PER CAPITA INCOME IN NIGERIA

Abstract

This study investigates the impact of domestic savings, foreign direct investment (FDI), and domestic investment on per capita income in Nigeria over the period 1980 to 2023, using the Autoregressive Distributed Lag (ARDL) approach. The findings reveal that, in the long run, domestic savings have a statistically significant negative effect on per capita income, suggesting inefficiencies in financial intermediation. In contrast, FDI exerts a positive and statistically significant impact, though its magnitude is modest. Domestic investment also exhibits a significant negative effect on per capita income, reflecting resource misallocation and structural bottlenecks. Inflation is statistically insignificant in the long run but has a significant negative effect in the short run. The error correction term is negative and statistically significant, confirming a stable long-run relationship. These results highlight the paradoxical nature of Nigeria’s growth process, where traditional growth drivers underperform due to institutional weaknesses. Policy measures should focus on reforming the financial sector to mobilize and channel savings productively, improving the efficiency of public and private investments, and fostering a transparent environment to attract quality FDI. In addition, credible monetary policy is required to ensure price stability and enhance income growth.