ABSTRACT
Over the
years there has been rapid reform and amendments from 15% to 18% contribution
of pension fund scheme from the defined benefit to contributory pension fund
scheme. The delay in the reform had resulted to decline in the volume of funds
available in the capital market which in turn affects capital market
performance. Hence the broad objective of this study focused on the impact of
pension fund investments on capital marketperformance in Nigeria, from January,
2013 to April, 2021 being the period under review. To achieve this, the study
adopted a monthly data of pension fund investment in domestic ordinary shares,
pension fund investment in Federal government bonds, pension fund investment in
foreign ordinary shares and pension fund investment on corporate bonds and
capital market performance proxied by All share index. Monthly time series data from January, 2013
to April, 2021 were sourced from National Pension Commission monthly report and
Nigerian Stock Exchange fact book. The study employed Vector Error Correction
Model to test the hypotheses. The findings established that, pension fund
investment in domestic ordinary shares had a statistically positive and
significant impact on All shares index in the short–run and a statistically
significant impact in the long - run, pension fund investment in Federal
government bonds had no significant
impact on All shares index in the short- run but had a positive and significant impact on All shares index in the
long- run, pension fund investment in foreign ordinary shares had no significant impact on All shares index
in the short –run but statistically
significant in the long- run and pension
fund investment in corporate bonds had no significant impact on All shares
index in the short –run but had a significant impact in
the long-run on All shares index. In line with the above findings, the study
concluded that, investments of pension fund contributions in ordinary shares,
Federal government bonds, foreign ordinary shares and corporate bonds in the
long-run immensely contributed to capital market performance in Nigeria. On the
basis of
the findings,
the study
therefore, recommended that,
management of pension fund contribution should select invest outlets that stand
out to yield higher dividends and returns on investment as these lead to
increase in fund available in the
capital market and create more wealth for the contributors of pension fund..It
is also necessary that government establish policies that will result to more
contribution of pension fund by way of increasing the rate of contribution paid
by the employers of labour. This will bring about increase in volume of fund
available for investment in the capital market for investor to borrow to carry
out developmental projects. National Pension Commission, bearing in mind the
core essence of establishing pension fund scheme-to make pension fund
contribution available to the pensioner as at when due. Therefore, it is
important that National Pension Commission to regularly monitor the legality
and viability of institutions jostling to borrow pension fund contribution or
have pension fund contribution invested in equity(shares) market as to avoid
loss of contributors funds. It is needful for the National Pension Commission
to introduce more investment outlets in the capital market as this will result
to investors making better choice of investment outlets and spread of risk and
to reduce loss of pension contributions when restricted to few investment
outlets. Also necessary to supervise the financial accounts or reports of
PPFAs,CPFAs and PFCs on monthly basis as to avoid pension fund contribution
meant for investment been misappropriated to poor performance of capital market
due to inadequate fund.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Declaration iv
Acknowledgements v
Table of
Contents vi
Abstract x
CHAPTER 1: INTRODUCTION
1.1
Background to the Study 1
1.2
Statement of the Problem 11
1.3
Objectives of the Study 12
1.4
Research Questions 12
1.5
Statement of the Hypotheses 13
1.6
Significance of the Study 13
1.7
Scope of the Study 15
1.8
Limitations of the Study 15
1.9
Operational Definition of Terms 16
CHAPTER 2: REVIEW OF RELATED
LITERATURE
2.1
Conceptual Framework 20
2.1.1
Concept of capital market activities 24
2.1.2
Emergence and development of pension fund scheme in Nigeria 24
2.1.3 The
challenges of the old pension scheme 27
2.1.3.1
Poorly funded 28
2.1.3.2
Weak administration of the old pension scheme 28
2.1.3.3
Poor framework 29
2.1.4 The
beginning of new pension scheme in Nigeria 30
2.1.5 The
national pension commission 31
2.1.5.1
Pension fund administrators 32
2.1.5.2
Pension fund custodians 32
2.1.5.3 The
closed pension fund administrators 32
2.1.6
Features of compulsory or contributory pension scheme 33
2.1.7 Amendment
of pension reform act 2004 in 2011, 2012, and 2014 33
2.1.8
Upward review of the punishment, penalties or sanctions 34
2.1.9
Increase in rate of pension contribution of participants 35
2.1.10
Accessibility of benefits in event of loss of job 35
2.1.11
Opening of retirement savings account 36
2.1.12
Challenges of the new pension scheme 36
2.1.13
Pension and operation of pension fund contribution
37
2.1.14 Financial
markets 43
2.1.15 The
money market 44
2.1.16 The
place of the stock market
45
2.1.17 The
Nigerian stock exchange or market 45
2.1.18 The
bond market 47
2.1.19
Equity market 48
2.1.20The
pension fund investment guidelines 49
2.1.21.
Equities pension fund 50
2.1.22
Private equity funds 50
2.1.23
Bonds pension fund 50
2.2
Theoretical Framework 51
2.2.1
Permanent income hypothesis theory 51
2.2.2 The theory
of pooling 52
2.2.3 The
life-cycle theory 53
2.3
Empirical Review of Literature 56
2.4 Summary
of Reviewed Empirical Literature 71
2.5 Research
Gap 82
CHAPTER 3: METHODOLOGY
3.1
Research Design 84
3.2Area of
Study 84
3.3 Sources
of Data 85
3.4
Description of Model Variables 85
3.4.1
Dependent variable 85
3.4.2
Independent variables 86
3.5 Model
Specification 88
3.5.1
Apriori expectation
90
3.6 Method
of Data Analysis 90
CHAPTER 4: RESULTS AND DISCUSSION
4.1
Presentation of Data 95
4.2 Data
Analysis 95
4.2.1
Descriptive statistic 95
4.2.2 Unit
root test 96
4.2.3 Lag
order selection criteria (ASII)
97
4.2.4Optimal
length selection criteria(DOSS) 98
4.2.5Optimal
length selection criteria(FGBS) 98
4.2.8 Optimal
length selection criteria(FORS) 99
4.2.7
Optimal Length selection criteria(CRBS) 100
4.2.8Cointegration
test 100
4.2.8.
Johansen cointegration test result 101
4.2.9
VECM
102
4.3 Test of
Hypotheses 106
4.4
Discussion of Findings 109
CHAPTER 5: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary 111
5.2
Conclusion 112
5.3
Recommendations
112
5.4
Contribution to Knowledge
113
5.5
Suggested Area for Further Research
114
References 115
Appendices 125
LIST OF TABLES
4.2
Descriptive Statistic 95
4.2.3 Unit
Root Test 96
4.2.4.Optimal
length selection criteria(DOSS) 97
4.2.5
Optimal length selection criteria(FGBS) 98
4.2.6Optimal
length selection criteria(FORS) 98
4.2.7OptimallLength
selection criteria(CRBS) 99
4.2.8
Johansncointegration test result 101
4.2.9
VECM Results 102
GODSON, O (2023). Pension Fund Investments And Capital Market Performance In Nigeria. Mouau.afribary.org: Retrieved Dec 23, 2024, from https://repository.mouau.edu.ng/work/view/pension-fund-investments-and-capital-market-performance-in-nigeria-7-2
OKEZIE, GODSON. "Pension Fund Investments And Capital Market Performance In Nigeria" Mouau.afribary.org. Mouau.afribary.org, 10 Aug. 2023, https://repository.mouau.edu.ng/work/view/pension-fund-investments-and-capital-market-performance-in-nigeria-7-2. Accessed 23 Dec. 2024.
OKEZIE, GODSON. "Pension Fund Investments And Capital Market Performance In Nigeria". Mouau.afribary.org, Mouau.afribary.org, 10 Aug. 2023. Web. 23 Dec. 2024. < https://repository.mouau.edu.ng/work/view/pension-fund-investments-and-capital-market-performance-in-nigeria-7-2 >.
OKEZIE, GODSON. "Pension Fund Investments And Capital Market Performance In Nigeria" Mouau.afribary.org (2023). Accessed 23 Dec. 2024. https://repository.mouau.edu.ng/work/view/pension-fund-investments-and-capital-market-performance-in-nigeria-7-2