IMPACT OF FINANCIAL LITERACY ON RETIREMENT SECURITY AMONG PUBLIC AND PRIVATE SECTOR EMPLOYEES IN SOUTH-WEST NIGERIA

Abstract

This study sought to investigate the effect of financial literacy on retirement security among workers in South-western Nigeria, specifically considering two important dimensions: retirement planning and retirement savings. Even though there was pension reform in 2004, which led to the introduction of CPS, and total pension assets have surpassed N27 trillion, coverage of the scheme remains low owing to limited accessibility, particularly for informal sector employees, who account for 10% of the Nigerian labour force. There are about 75 million informal-sector workers who will retire without any financial cushion. Therefore, there is a need to determine how financial literacy affects retirement outcomes. Quantitative research methodology was employed by distributing structured questionnaires to workers in South-western Nigeria and conducting surveys. In analysing data collected from respondents, Structural Equation Modelling (PLS-SEM) was employed to test the measurement and structural models. Results show a strong relationship between financial literacy and both retirement planning (β = 0.701, t = 3.980, p < 0.05) and retirement savings (β = 0.700, t = 2.850, p < 0.05). All variables showed good reliability (α > 0.77) and convergent validity (AVE > 0.68). This study concludes that increasing financial literacy can help address retirement inadequacy in Nigeria. This study also recommends conducting financial literacy awareness campaigns, employer-sponsored financial literacy training programs, and designing more accessible pension schemes, especially for the informal workforce.