Savings and balance of trade is a macro-economic variable used to attain economic growth and development. If trade deficit result from importing goods or technology that make the economy more productive and stronger, then perhaps trade deficit aren’t so bad. Second, this depends on what is causing what. It is well known that the large deficit of the1990s were the result of a massive inflow of capital from abroad. What causes this desire by foreigners to invest in Nigeria? Surely a number of things but economist believe it was a combination of poor investment project abroad and the thriving market in Nigeria. Why would this cause trade deficit-isn’t this all about the financial account? There are two parts to this answer. The first is the accounting identity between current account deficit and financial account surpluses. This is a good reason to pay attention to this problem. To ascertain the relationship between savings and trade deficit in Nigeria.

INTRODUCTION

According to Uremadu (2006), savings can be defined as “the amount left over when the cost of a person’s consumer expenditure is subtracted from the amount of disposable income that he or she earns in a given period of time”. Saving, therefore, is the decision to defer consumption and to store this deferred consumption in some form of asset (Aghevli, et al., 2005).

Savings is described as a financial assets accumulated by the public- both government and private agents in the organized financial system (Tochukwuet al., 2008).Saving naturally play an important role in the economic growth and development process. Savings determine the national capacity to invest and thus to produce, which in turn, affect economic growth potential. Low saving rates have been cited as one of the most series constraints to sustainable economic growth. Growth models developed by Romer (1986) and Lucas (1988) predict that higher savings and the related increase in capital accumulation can result in a permanent increase in growth rates.

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