Impact of Foreign Aid on Saving in Nigeria

ABSTRACT 

Most developing countries strive to attract foreign aid because of its anticipated efficacy in fostering economic development in recipient countries. This study examines the impact of foreign aid on savings in Nigeria, using a two step approach of Engle-Granger procedure in a co-integration analysis. The study uses time series on a number of macroeconomic variables, spanning for the period 1970-2009. Secondary data were sourced from Central Bank of Nigeria (CBN) statistical bulletin (various issues). Results indicate that in the long-run, foreign aid (ODA), impacts positively on national savings (GNS) and negatively in the short –run. On the contrary, the long-run effect of foreign direct investment (FDI), on national savings is negative and positive in the short-run. The variables, gross domestic product (GDP) and interest rate impact positively on national savings both in the long and short run. The error correction mechanism (ECM), term was found to be negative and significant, which confirms the existence of a long-run relationship between foreign aid and savings in Nigeria. Based on the above findings, it is recommended that aid supporting institutions and policies require much strengthening in order to increase the magnitude of its impact. Government should also, establish a civil society fund on aid effectiveness, results and accountability to support the review and independent accountability function of national civil society organizations in aid effectiveness for results and accountability.

TABLE OF CONTENTS

Title i

Approval Page ii

Dedication iii

Abstract iv

CHAPTER ONE: Introduction

Background of the Study 1

Statement of Problem 4

Objective of the Study 7

Hypotheses 8

Significance of the Study 8

Scope and Delimitation of Study 9

CHAPTER TWO: Literature Review

Conceptual Framework 10

Theoretical Framework 13

Empirical Literature 18

Limitations of Previous Studies 24

CHAPTER THREE: Methodology

Theoretical Background 27

Model Specifications 29

Justification of the Model 31

Estimation Procedure 31

Data 31

Econometric Software 31

CHAPTER FOUR

Data, Analysis and Result 32

 CHAPTER FIVE

Summary, Conclusion and Recommendation 40

References/Appendices