How Does Pensions Affect Savings in Nigeria? Evidence from Quarterly Data


  • Nurudeen Abu
  • Bilyaminu Kadandani
  • Ben Obi
  • Murtala Modibbo



savings, pensions, internal conflicts, Nigeria, ARDL


This study investigates the effect of pensions on savings in Nigeria using quarterly data over the 2004-2015 period. Employing the ARDL bounds testing technique, the empirical evidence reveal that there is cointegration between pensions and savings, along with internal conflicts, unemployment, real interest rate and income level. The results indicate that pensions has a negative and significant effect on savings in the short-run, while its effect on savings is positive and significant in the long-run. These findings suggest that the availability of pensions will displace savings in the short-run, while it provides an avenue for individuals to increase their retirement income in the long-run, leading to higher national savings. In addition, internal conflicts and unemployment have a negative and significant effect on savings in the short-run and the long-run. Based on these findings, this study recommends policies to promote pension contributions, including reducing internal conflicts and unemployment to raise savings in Nigeria in the long-run.

JEL Codes - E21; F51; H53; H55


Abdulazeez, N., 2015. Pension scheme in Nigeria: History, problems and prospects. Arabian Journal of Business and Management Review, 5(2), 1-6.

Abu, N., 2017. Does Okun's law exist in Nigeria? Evidence from ARDL bounds testing approach. Contemporary Economics, 11(2), 131-144.

Abu, N., Karim, M. Z. A., and Aziz, M. I. A., 2013. Low savings rates in the Economic Community of West African States (ECOWAS): The role of the political instability- income interaction. South East European Journal of Economics and Business, 8(2), 53-63.

Abu, N., Karim, M. Z. A., and Aziz, M. I. A., 2015. Low savings rates in the Economic Community of West African States (ECOWAS): The role of corruption. Journal of Economic Cooperation and Development, 36(2), 63-90.

Abu, N., and Wafure, O. G., 2009. Long-run determinants of savings in Nigeria, 1981-2007: Evidence from time series data. Nigerian Journal of Economics and Management, 4(1), 87-106.

Adelakun, O. J., 2011. The nexus of private savings and economic growth in emerging economy: A case of Nigeria. Journal of Economics and Sustainable Development, 2(6), 31-45.

Adelakun, O. J., 2015. An investigation of the determinants of savings and investment in Nigeria. International Economics and Business, 1(2), 1-16.

Adeniji, A. A., Akinnusi, D. M., Falola, H. O., and Ohunakin, F., 2017. Administration of retirement benefits in Nigeria: Periscoping the effect on retirees. International Journal of Applied Business and Economic Research, 15(15), 319-333.

Aigbepue, S., and Ojeifo, S. A., 2014. Transparency and accountability in the Nigerian pension funds management. International Journal of Business and Management Invention, 3(6), 51-56.

Akinlo, A. E., 2006. The stability of money demand in Nigeria: An autoregressive distributed lag approach. Journal of Policy Modeling, 28(4), 445-452.

Akpan, I. T., and Ukpong, M. S., 2014. Pension administration and capital formation in Nigeria: The challenges. European Journal of Business and Management, 6(6), 116-122.

Alhassan, A. L., and Fiador, V., 2014. Insurance-growth nexus in Ghana: An autoregressive distributed lag bounds cointegration approach. Review of Development Finance, 4(2), 83-96.

Anderson, S. J., 1990. The political economy of Japanese saving: How postal savings and public pensions support high rates of household saving in Japan. Journal of Japanese Studies, 16(1), 61-92.

Ando, A., and Modigliani, F., 1963. The 'life-cycle' hypothesis of saving: Aggregate implications and tests. The American Economic Review, 53(1), 55-84.

Antai, A., Sylvester, I. J. J., and Anam, B. E., 2015. Estimation of the short run and long run determinants of domestic savings rate in Nigeria (1970-2008). International Journal of Innovative Research in Technology. International Journal of Innovative Research in Technology.” Basic and Applied Sciences, 1(1), 40-58.

Athukorala, P., and Sen, K., 2004. The determinants of private saving in India. World Development, 32(3), 491-503.

Athukorala, P., and Tsai, P., 2003. Determinants of household saving in Taiwan: Growth, demography and public policy. The Journal of Development Studies, 39(5), 65-88.

Attanasio, O. P., and Rohwedder, S., 2003. Pension wealth and household saving: Evidence from pension reforms in the United Kingdom. The American Economic Review, 93(5), 1499-1521.

Baharumshah, A. Z., Lau, E., and Khalid, A. M., 2006. Testing twin deficits hypothesis using VARs and variance decomposition. Journal of the Asia Pacific Economy, 11(3), 331-354.

Baharumshah, A. Z., and Rashid, S., 1999. Export, imports and economic growth in Malaysia: Empirical evidence based on multivariate time series. Asian Economic Journal, 13(4), 389-406.

Bailliu, J. N., and Reisen, H., 1998. Do funded pensions contribute to higher aggregate savings? A cross-country analysis. Weltwirtschaftliches Archiv, 134(4), 692-711.

Balde, Y., 2011. The impact of remittances and foreign aid on savings/investment in Sub-Saharan Africa. African Development Review, 23(2), 247-262.

Bamidele, A., Jibrin, M., and Isa, A., 2015. Determinants of domestic gross savings in Nigeria: Lessons for policy. CBN Economic and Financial Review, 53(3), 16-37.

Bloom, D. E., Canning, D., and Graham, B., 2003. Longevity and life cycle savings. The Scandinavian Journal of Economics, 105(3), 319-338.

Bloom, D. E., Canning, D., Mansfield, R. K., and Moore, M., 2007. Demographic change, social security systems and savings. Journal of Monetary Economics, 54(1), 92-114.

Browning, M. J., 1982. Savings and pensions: Some UK evidence. Economic Journal (London), 92(368), 954-963.

Cagan, P., 1965. The effect of pension plans on aggregate saving: Evidence from a sample survey. NBER Occasional Paper, 95.

Card, D., and Ransom, M., 2011. Pension plan characteristics and framing effects in employee savings behaviour. The Review of Economics and Statistics, 93(1), 228-243.

Chetty, R., Friedman, J. N., Leth-Petersen, S., Nielsen, T. H., and Olsen, T., 2014. Active vs. passive decisions and crowd-out in retirement savings accounts: Evidence from Denmark. The Quarterly Journal of Economics, 129(3), 1141-1219.

Cook, C. J., 2005. Population growth and savings rates: Some new cross-country estimates. International Review of Applied Economics, 19(3), 301-319.

Dicks-Mireaux, L., and King, M., 1984. Pension wealth and household savings: Tests of robustness. Journal of Public Economics, 23(1-2), 115-139.

Disney, R., 2000. Declining public pensions in an era of demographic ageing: Will private provision fill the gap? European Economic Review, 44(4-6), 957-973.

Disney, R., Emmerson, C., and Wakefield, M., 2001. Pension reform and saving in Britain. Oxford Review of Economic Policy, 17(1), 70-94.

Duasa, J., 2007. Determinants of Malaysian trade balance: An ARDL bound testing approach. Global Economic Review, 36(1), 89-102.

Enache, C., Milos, L. R., and Milos, M. C., 2015. Pension reform and capital market development in Central and Eastern European countries. Economic Research. Ekonomska Istrazivanja, 28(1), 75-84.

Engle, R. F., and Granger, C. W. J., 1987. Co-integration and error correction: Representation, estimation and testing. Econometrica, 55(2), 251-276.

Feldstein, M., 1974. Social security, induced retirement, and aggregate capital accumulation. Journal of Political Economy, 82(5), 905-926.

Feldstein, M., 1978. Do private pensions increase national savings? Journal of Public Economics, 10(3), 277-293.

Feng, J., He, L., and Sato, H., 2011. Public pension and household saving: Evidence from urban China. Journal of Comparative Economics, 39(4), 470-485.

Gandolfo, G., 1981. Quantitative Analysis and Econometric Estimation of Continuous Time Dynamic. Amsterdam: North-Holland.

Green, F., 1981. The effect of occupational pension schemes on saving in the United Kingdom: A test of the life cycle hypothesis. Economic Journal (London), 91(361), 136-144.

Greene, W., 2003. Econometric Analysis (5th ed. ed.). New Jersey: Prentice Hall.

Gustman, A. L., and Steinmeier, T. L., 1999. Effects of pensions on savings: Analysis with data from the health and retirement study: North-Holland.

Ibeme, P. N., and Aniche, A., 2016. Diagnosing the elephantine problems in the implementation of the 2004 pension act in Enugu State civil service. Journal of Policy and Development Studies, 10(4), 102-127.

Imoisi, A. I., Iyafekhe, C., and Ezeibekwe, F. O., 2018. Determinants of aggregate savings in Nigeria. Accounting & Taxation Review, 2(1), 186-198.

Johansen, S., 1988. Statistical analysis of cointegration vectors. Journal of Economic Dynamics & Control, 12(2-3), 231-254.

Johansen, S., 1991. Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica, 59(6), 1551-1580.

Johansen, S., and Juselius, K., 1990. Maximum likelihood estimation and inference on cointegration - With applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169-210.

Kao, C., and Chiang, M. H., 2001. On the estimation and inference of a cointegrated regression in padel data. In B. Baltagi, T. Fomby and R. Carter Hill (Eds.), Nonstationary Panels, Panel Cointegration and Dynamic Panels (Vol. 15, pp. 179-222). Bingley: Emerald Group Publishing Limited.

Katona, G., 1965. Private pensions and individual saving. Survey Research Center, 40.

Lucas, R., 1988. On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3-42.

Modigliani, F., and Brumberg, R., 1954. Utility Analysis and the Consumption Function: An Interpretation of Cross-Section Data. In K. K. Kurihara (Ed.), Post Keynesian Economics (pp. 49). New Jersey: Ruthers University Press.

Mojekwu, R. O., and Ogbulu, O. M., 2017. Determinants of national savings in Nigeria: A multivariate analysis (1981-2015). Journal of Finance, Banking and Investment, 4(1), 112-132.

Montalvo, J. G., 1995. Comparing cointegrating regression estimators: Some additional Monte Carlo results. Economics Letters, 48(3-4), 229-234.

Munnell, A. H., 1976. Private pensions and savings: New evidence. Journal of Political Economy, 84(5), 1013-1032.

Narayan, P. K., 2005. The saving and investment nexus for China: Evidence from cointegration tests. Applied Economics, 37(17), 1979-1990.

Narayan, S., and Narayan, P. K., 2004. Determinants of demand for Fiji's exports: An empirical investigation. The Developing Economies, 42(1), 95-112.

National Bureau of Statistics, 2019. National Bureau of Statistics Official Page. from

National Pension Commission, 2019. National Pension Commission Official Page. from

Nwachukwu, T. E., and Egwaikhide, F. O., 2007. An error-correction model of the determinants of private saving in Nigeria. Paper presented at the African Economic Society (AES) Conference, Cape Town, South Africa.

Nwachukwu, T. E., and Odigie, P., 2011. What drives private saving in Nigeria? . AERC Research Paper, 212.

Olusoji, M. O., 2003. Determinants of private savings in Nigeria: An error correction approach. NDIC Ouarterly, 13, 85-96.

Otiwu, K., Okere, P. A., and Uzowuru, L. N., 2018. Determinants of private domestic savings in Nigeria (1981- 2015). International Journal for Innovation Education and Research, 6(2), 21-40.

Ozioma, E. O. F., Idenyi, O. S., Chinyere, U. C., and Eze, A. O., 2016. The determinants of domestic private savings in Nigeria. British Journal of Economics, Management & Trade, 15(2), 1-16.

Ozturk, I., and Acaravci, A., 2010. The causal relationship between energy consumption and GDP in Albania, Bulgaria, Hungary and Romania: Evidence from ARDL bounds testing approach. Applied Energy, 87(6), 1938-1943.

Ozturk, I., and Acaravci, A., 2011. Electricity consumption and real GDP causality nexus: Evidence from ARDL bounds testing approach for 11 MENA countries. Applied Energy, 88(8), 2885-2892.

Pesaran, M. H., and Shin, Y., 1999. An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. In S. Strøm (Ed.), Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium (pp. 371-413). Cambridge: Cambridge University Press.

Pesaran, M. H., Shin, Y., and Smith, R., 2001. Bound testing approaches to the analysis of level relationship. Journal of Applied Econometrics, 16(3), 289-326.

Phillips, P. C. B., and Hansen, B. E., 1990. Statistical inference in instrumental variables regression with I(1) processes. The Review of Economic Studies, 57(1), 99-125.

Poterba, J. M., Venti, S. F., and Wise, D. A., 1996. How retirement saving programs increase saving. The Journal of Economic Perspectives, 10(4), 91-112.

Romer, P., 1986. Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037.

Saikkonen, P., 1992. Estimation and testing of cointegrated systems by an autoregressive approximation. Econometric Theory, 8(1), 1-27.

Samwick, A. A., 2000. Is pension reform conducive to higher saving? The Review of Economics and Statistics, 82(2), 264-272.

Singh, T., 2015. Trade openness and economic growth in Canada: An evidence from time-series tests. Global Economy Journal, 15(3), 361-407.

Smith, S. F., 1998. Cointegration tests when data are linearly interpolated. State University of New York at Albany.

Solow, R., 1956. A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65-94.

Stock, J. H., and Watson, M. W., 1993. A simple estimator of cointegrating vectors in higher order integrated systems. Econometrica, 61(4), 783-820.

Tang, C. F., 2008. A re-examination of the relationship between electricity consumption and economic growth in Malaysia. Energy Policy, 36(8), 3077-3085.

Tang, C. F., and Lean, H. H., 2007. Is Phillips curve stable in Malaysia? New empirical evidence. Malaysian Journal of Economic Studies : Journal of the Malaysian Economic Association and the Faculty of Economics and Administration, University of Malaya, 44(2), 95-105.

Tang, C. F., and Shahbaz, M., 2011. Revisiting the electricity consumption-growth nexus for Portugal: Evidence from a multivariate framework. MPRA Paper, 28393.

Uremadu, S. O., 2007. Core determinants of financial savings in Nigeria: An empirical analysis for national monetary policy formulation. International Review of Business Research Papers, 3(3), 356-367.

Uzoh, B. C., and Anekwe, S. C., 2018. The contributory pension scheme and the fate of retired and retiring Nigerian workers. International Journal of Academic Research in Business and Social Sciences, 8(3), 527-541.

World Bank, 2019. World Development Indicators. from




How to Cite

Abu, N., Kadandani, B., Obi, B., & Modibbo, M. (2019). How Does Pensions Affect Savings in Nigeria? Evidence from Quarterly Data. Scientific Annals of Economics and Business, 66(4), 541–558.