IMPACT OF PENSION FUND ON STOCK EXCHANGE DEVELOPMENT: EVIDENCE FROM NIGERIAN CONTRIBUTORY PENSION SCHEME

Abstract

This research paper explores the intricate relationship between pension funds and stock exchange development, with a specific focus on the Nigerian Contributory Pension Scheme (CPS). In the context of Nigeria's evolving financial landscape, the study investigates how pension funds, as a substantial source of institutional investment, impact the growth and stability of the Nigerian stock exchange. The study employs the Autoregressive Integrated Moving Average (ARIMA) regression modeling technique for quarterly data for the period of 2005 to 2022. Data gathered from a variety of sources, including pension fund administrators, stock exchange data, and the World Bank, provides the foundation for a thorough investigation. The research encompasses a historical overview of Nigeria's pension system, an examination of the investment patterns of pension funds, and an evaluation of their impact on stock market dynamics. Findings from the study reveal significant insights into the symbiotic relationship between pension funds and stock exchange development. Pension funds, as a vital source of long-term capital, exert a stabilizing influence on the stock market, fostering liquidity and reducing volatility. The research also identifies challenges and opportunities within the Nigerian (CPS) framework, highlighting areas for improvement in governance, regulation, and investment diversification. In conclusion, this research underscores the crucial role of pension funds in the development of the Nigerian stock exchange and, by extension, the broader financial sector. It identified that pension fund assets play a significant role in improving overall participation in the stock market.

Keywords: Pension fund, Nigeria exchange group, contributory pension scheme, ARIMA