Influence of Contributory Pension Scheme on Economic Development in Nigeria

Raphael S. Etim, Adebimpe O. Umoren & Nkereuwem A. Udo

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Abstract

It is almost two decades since the enactment of the Pension Act 2004 yet there are still concerns as to whether the new pension scheme has addressed the problems that were preponderant in the previous scheme. The main objective of this study was to examine the influence of contributory pension scheme on economic development in Nigeria. The design adopted for this study was expost-facto; data used for analysis were elicited from Central Bank Statistical Bulletin and National Pension Commission Annual Report. To achieve this objective, a model was formulated based on empirical and theoretical reviews. Per Capita Income was used as the explained variable, while private-sector pension funds, public-sector pension funds and total pension funds were the explanatory variables in the model. The scope of the study covered pension matters in respect of public and private sector retirees in Nigeria as a whole. The researchers employed the Fully Modified Least Squares (FMOLS) Model to analyze data. The researcher used the p-value as the basis for the acceptance and rejection of null hypotheses. Where the critical p-value computed is less than a 5% significance level, the variable was taken as being significant, hence it was rejected. The findings elicited from this study revealed that private sector pension funds and public sector pension funds with p-values of 0.0117 and 0.0089 respectively, had a positive significant influence on Per Capita Income, while total pension funds recorded an insignificant influence on per capita income with a p-value of 0.8641. From the inferential result, it was deduced that the contributory pension scheme had a positive and significant influence on economic development in Nigeria. Making timely payments of pensions to beneficiaries both in the private and public sectors would inject money into the economy which will boost economic development. From the foregoing, the researcher recommended that government should ensure that the payment of pensions is made timely, in line with Pension Reform Act 2014.

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