IMPACT OF PENSION FUND MANAGEMENT ON ECONOMIC GROWTH OF NIGERIA

CHAPTER ONE

1.0         INTRODUCTION

1.1         AN OVERVIEW OF THE STUDY

Business organizations all over the world, whether profit making or non-profit making is made up of either the human element or the material component. These vital parts separate work interdependently for the attainment of the organizational goals. Therefore, for organization to achieve its goals and objectives, the workforce must be duly motivated.

According to Ibe (2012), “The beauty of the struggle of labourer is in the eating of salaries or wages.” He further noted that the privilege of receiving pension and gratuity appear to be the greatest manifestation of the victory of a labourer after a long service to his or her employer.It is paramount to note that even though the labourer earns wages or salary today, his concern should also be about tomorrow when he is no longer fit to carry on any productive activity. Mohammed (2012), stressed the importance for the average Nigerian worker to look for a pensionable job for stability of the employment contract. The labourer has to look forward to the enjoyment of a favourable welfare package when he leaves employment due to old age. With the institutionalization of pensionable employment, the attractiveness of any employment contract is being judged in terms of whether it is pensionable or not.

 Ibe (2012) says the rationale behind any individual entering the labour market is therefore hinged upon the nature of the job i.e. pensionable or non-pensionable jobs and this is governed by a set of parameters that he needs to make some assumption about their future value. They include:

Change in the remuneration of the jobs. The rate of inflation. The prevailing interest rate in the economy. The size, survival, profitability, and future solvency of the employee. Profitability of major external destabilizing force (pension commission) 2012 pension fund act.

Ahmadu (2012) however frowned at the Nigerian pension scheme. He strongly criticized the pension system as:

Overdependence on budgeting pension. Weak, inefficient and poor staffing/equipment and administration. Low compliance level from private sector. Inadequate pension. Delay in payment

The above problems therefore increase the call for a better pension fund administration which is service driven and pension oriented. The research work shall focus on the impact of effective management of pension fund in Nigeria economy.

 1.2         STATEMENT OF THE PROBLEM

The Nigerian pension system is bedeviled by enormous problem ranging from the failure of the scheme to contribute basic social security for the aged to the inadequacy of the administrators to effectively invest funds accumulated from pension scheme. The problems faced by the Nigerian pension commission (PENCOM) are as follows: channeling of pension fund to inappropriate investment source. This Ahmadu (2010) noted that Nigerian pension scheme is largely unsustainable due to the poor returns of investment, the proceeds of the pension scheme are not properly managed, the apparent low level of employment offered by the pension scheme. The National pension commission (PENCOM) as the regulatory body was weak in enforcing regulatory compliance, and the non transferability of pension benefit and poor record keeping. The above challenges vis-à-vis has negative impact on the economy therefore calls for the study.

Hence, this research work shall focus on the impact of pension fund management on the Nigerian economy with a view to achieving better service delivery for all pensioners in the nation.

1.3         OBJECTIVE OF THE STUDY

The broad objective of this study is to investigate the relationship between pension fund management and economic growth of Nigeria. The specific objectives are to:

Examine whether pension fund investment leads to economic growth of Nigeria.

b. Determine the effects of income from pension on economic growth.

c. To determine whether economic growth is driven by pension welfare.

 1.4     RESEARCH QUESTIONS

Olannye (2006) defined the research questions as set of questions which the researcher hoped the entire study would answer. The study seeks to answer the following questions.

Does pension fund investment lead to economic growth of Nigeria? Does income from pension fund have effect on economic growth of Nigeria? Is economic growth driven by pension welfare?

1.5     HYPOTHESES

Leedy and Ormrod (2000) defined research hypothesis as a topical supposition or reasonable guess, an educated conjecture that provides a tentative explanation for a phenomenon under investigation.

The research hypothesis is important because it guides the research in his/her thought process towards the solution of the research problems or sub-problems. The research hypothesis is developed from the research question and the main elements of the study are summarized in a form that established the form for testing, statistical and ultimately research significance, Sacket (2000).

The hypotheses for the research work are as follows:

H01: There is no significant relationship between pension fund investment and

economic growth of Nigeria.

H02: There is no significant relationship between income from pension and

economic growth of Nigeria.

H03: There is no significant relationship between pension welfare and

economic growth of Nigeria.

1.6     SCOPE OF THE STUDY

This research work is centred on the “Impact of pension fund management on the economic growth of Nigeria.” The study covers the performance of National Pension Fund, Nigeria over a period of five years (2009-2013).

1.7     SIGNIFICANCE OF THE STUDY

The study is expected to build on previous studies in the subject area of pension fund administration. It is also expected to serve as a base for future researcher who may want to drive into this area of study.It is hoped that this study will help in the reform of PENCOM of Nigeria and to make it more efficient and effective as well as positioning it to global standard. Lastly, it is hoped that it will ensure non-interference of economic and political factors.