AI Adoption and Psychological Contract Breach in Nigeria’s Public Sector: Mediating Effects of Job Displacement Anxiety and Reskilling Support, and the Moderating Role of Trust in Management

Abstract

This study explores the psychological and relational effects of the adoption of Artificial Intelligence (AI) in the public sector organisations in Nigeria that are undergoing digital transformation. The study is grounded in the framework of several theories, namely Conservation of Resources Theory, Technology Threat Avoidance Theory, Social Exchange Theory, Human Capital Theory, and Psychological Contract Theory. A model was developed and tested the relationship between AI adoption to job displacement anxiety, perceived reskilling support, and psychological contract breach, while also testing the moderating effect of trust in management. The study involved a quantitative cross sectional survey of 300 respondents from selected public sector organizations in Nigeria from December 2025 to February 2026. Partial Least Squares Structural Equation Modelling (PLS-SEM) was used for analysing the data. The results show that the use of AI had a significant impact on job displacement anxiety and on the perceived support for reskilling. Job displacement anxiety had the greatest positive direct effect on psychological contract breach, and as well as the adoption of AI. The perceived reskilling support was less strongly but still significantly, related to psychological contract breach. The negative correlation between the adoption of AI and psychological contract breach was significantly reduced when trust in management was high, suggesting that trust in management was a protective factor in the context of digital transformation. The study provides an integrated theory of how employees react to the use of AI and highlights the importance of transparency in AI governance, leadership building trust in AI, and continuous investment in reskilling workers to support successful public sector digital transformation.