Effect of Contributory Pension Scheme on the Development of Nigerian Capital Market

Abstract

The study examines the effect of contributory pension scheme on the development of Nigerian Capital Market. The variables which are used to determine the specific objectives are:; the Contributory Pension Scheme (Independent variable) proxied by Public Sector Pension Contribution Fund, and Private Sector Pension Contribution Fund as the main (focused) variables; and Inflation Rate and Interest Rate as Control Variables. Besides, Nigerian Capital Market Development (dependent variable) was proxied by Nigerian Market Capitalization. The study employed annual time series data spanning the years from 2004-2020. The study is based on the Ex-post facto research design. The target population of the study comprised of the National Pension Commission and all the Pension Fund Administrators (PFAs) in Nigeria between the years 2004–2020. Data were analyzed using the Auto-Regressive Distributed Lags and the Ordinary Least Square via the use of E-views 10. The study concludes that Public Sector Pension Fund has not contributed significantly to the development of the Capital Market in Nigeria, but Private Sector Pension Fund has contributed significantly to the development of the Capital Market in Nigeria. The study established that pension fund investment affects capital market development positively. It is recommended that there should be proper liberalization of public pension fund investment and monitoring of the management of pension assets invested in the capital market to improve market capitalization; and in the sense that the Private Sector Contribution F u n d has had a significant effect on the Nigerian capital market development, there should be a generation of huge pool of long term investible funds, promotion of foreign direct investment, effective measures to reduce inflation rate, jobs creation, increase in return on investment, better and guaranteed retirement benefits.