Assessment of the Savings Behaviour of Urban Workers and Its Determinants in Ibadan

Savings behaviour determines the availability of domestic capital for investment, and examining its determinants among urban workers in Ibadan provides evidence for financial policy and pension reform in South West Nigeria. This study assessed savings behaviour and its determinants among formal and informal sector workers in Ibadan North, Ibadan South West, and Oluyole Local Government Areas, Oyo State. A cross-sectional survey of 300 workers (150 formal and 150 informal sector) was conducted. Data covered monthly income, savings amount, savings vehicle used, reasons for saving, and barriers to saving. Tobit regression was applied to account for zero-saving households. Results showed that 58.7 percent of formal sector workers saved regularly compared to only 28.3 percent of informal sector workers. The mean monthly savings rate was 12.4 percent of income for formal workers and 7.2 percent for informal workers. Income level was the strongest positive predictor of savings volume. Risk aversion and desire for old-age security were the most cited savings motivations. Emergency needs were the most common reason for withdrawing savings. Financial literacy significantly increased both the probability and volume of saving. Pension contribution compliance was 87 percent among sampled formal workers. The study concludes that savings rates in Ibadan are modest and heavily stratified by formality of employment. Recommendations include financial literacy campaigns for informal workers, expansion of voluntary pension products, and mobile savings platforms targeted at informal sector workers.

Keywords: savings behaviour, urban workers, Ibadan, financial literacy, informal sector