The Impact of Nigeria’s New Pensions Reform on National Savings: Empirical Evidence

Abstract

The study used a simple Keynesian macroeconomic framework to examine the effect of
the new pension reform scheme on national savings in Nigeria during 2007-2016.
Annual data of the relevant variables were obtained from secondary sources that
include the National Pension Commission (Pencom), National Bureau of Statistics
2016, World Bank country data 2016, and the Central Bank of Nigeria bulletin 2016.
The ordinary least squares (OLS) regression technique was utilized for the analyses.
Empirical results show that pension assets have a significant negative effect on
national saving, hence, an increase in pension assets hinders the growth of national
savings in Nigeria. This situation can be explained by the continuous pension debt
paid by the government to individuals who transited from the old to the new pension
scheme. The results also show that income and deposit rates have a significant positive
impact on savings. Finally, budget deficit and national savings are inversely related,
with the former having a significant influence on the latter. The study recommends
that the government should finance pension debt using tax; and that the pension fund
should be invested in infrastructural development.

Keywords: funded systems, transition, life-cycle model, tax financing, infrastructural
development