Savings behavior among low-income individuals in Nigeria: a behavioral economics perspective

Abstract

Low-income individual's savings behavior is of essence in economics and development studies, more so in developing countries like Nigeria. This study considers low-income earners in Nigeria, looking at their savings behavior from the perspective of behavioral economics, with regard to economic incentives, psychological factors, and socio-cultural influences. In this qualitative study, data were collected through in-depth interviews among low-income earners in Nigeria. The data analysis was done using methods to identify major factors that affect savings behavior. The present study finds that low-income people in Nigeria display saving behavior for a variety of factors. It is driven by economic incentives, including access to formal financial services and competitive interest rates. Subject to several psychological factors, such as loss aversion and present bias. Socio-cultural norms influence individual savings efforts through traditional savings practices and community obligations. Moreover, low financial literacy and, accordingly, limited accessibility of financial education are major barriers to effectively saving among this category of people. The findings add to the literature available on household finance and poverty alleviation in Nigeria and other developing countries. It provides valuable insights for policymakers, financial institutions, and development practitioners in creating tailored interventions and financial products that would meet specific needs among low-income earners. The findings of this study unveil the potential of savings to absorb economic shocks, finance productive assets, and increase the level of financial inclusion amongst poor communities meaning that adopting integrated measures—economic, psychological, and socio-cultural—enhances the weak saving habits of low-income earners in Nigeria.