Nigerian Pension Scheme and Poverty Reduction in Nigeria: An Empirical Assessment (2004-2015)

Abstract

This study employed econometric time series analysis to examine the effect of pension scheme contributions into the retirement saving accounts of employees on national, urban and rural poverty levels. Secondary data for the period 2004 to 2015 were collected from the National Pension Commission (PenCom) Annual Reports, National Bureau of Statistics and Worldbank.org.  The study applied the Ordinary Least Square (OLS) regression technique in which variations in national, urban and rural poverty levels were regressed on pension contributions into the retirement saving accounts of employees, gross national income, population growth and unemployment rate. The diagnosed results revealed that pension contributions have no significant effect on national, urban and rural poverty levels. The findings also suggest that 60.19%, 63.05% and 65.37% variation in national, urban and rural poverty level respectively were as a result of joint changes in pension scheme contribution I to retirement savings account of employees, gross national income and population growth. The negative relationship between pension contribution and poverty level validates the life-cycle hypothesis, which envisaged that a good operational pension scheme has the potential of reducing poverty most especially among the elderly population, which in turn affects the general poverty level of a country. On the basis of the findings, Federal government of Nigeria should intensify the efforts to ensure wider coverage of the pension scheme to the lower tiers of government: States and Local Governments Areas. The National Pension Commission should strengthen its surveillance on the private sector to ensure full compliance with the provisions of the Pension Reform Act of 2014. Finally, there should be sustained promotion of wider publicity of the activities of National Pension Commission with the objective of educating and enlightening the general public on the implementation of the contributory pension scheme.