IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 2 NO. 9 2016

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Effects of Pension Funds’ Investments on Capital Market Performance in Nigeria

Abdul K. I. Zubair, PhD

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Abstract

Globally pension industry had undergone a series of reforms during the last two decades, as it is considered as a catalyst of economic growth and development. These reforms are largely necessitated by the increase in the population ageing and shortcomings of old age support mechanisms. The purpose of the reforms in pension industry is to ensure income security in old age at a least cost manner and aid financial markets developments. The pension industry in Nigeria witnessed 1.75% growth in the scheme membership during the first quarter of 2016, from 6,950,503 contributors at the end of the 2015 to 7,071,791 at the end of 2016 first quarter. The total monthly pension contribution made by contributors also increased to N3.55 trillion as at the end of first quarter 2016. This study examined the impact of pension fund investments on the performance of capital market in Nigeria. The study is a time series analysis covering a period from 2009Q3 to 2016Q1 using the Autoregressive Integrated Moving Average (ARIMA) regression technique. The study concludes that there is a significant positive relationship between pension funds’ investments and the performance of capital market in Nigeria after the 2004 major industry reform. Specifically, the study concludes that total pension investments in Nigeria improved the performance of the Nigerian capital market significantly in terms of depth and liquidity (market capitalization and value traded. Moreover, the study concludes that the interaction of macroeconomic indicators such as interest rate, inflation rate and GDP per capita with pension investments affect the capital market performance significantly. The study recommends that governments should ensure good and stable monetary policy in Nigeria so as to achieve the desired goal of the pension industry reforms, of investments capable of providing adequate resources to the retirees in Nigeria to cater for their old age needs. The study also recommends adequate regulations of the

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