Governance and Funds Investment: The Experience in Nigeria’s Pension Industry

Abstract

The major goal of an employee in a contributory pension scheme (CPS) arrangement is to attain financial security at retirement. This can be affected one way or the other by the quality of governance. Good governance would yield a desirable outcome while poor governance would likely create problems. To mitigate this problem, the National Pension Commission (PenCom) has set out guidelines on good governance for Pension Fund Administrators (PFAs). Using the United Nations Economic and Social Commission for Asian and the Pacific’s (UNESCAP) guidelines, the study examines five elements of governance such as transparency, accountability, inclusiveness, participation and rule of law as it relates to the investment guidelines in Nigeria. Using survey research design, data were collected from eighteen (18) PFAs and one hundred and three (103) pension contributors. The collected data were analyzed descriptively to explore stated objectives and research questions. The results of the analysis indicate that the five governance elements play a moderately high role in the investment of pension funds in Nigeria. Findings from the study suggest that the PFAs are largely transparent; accountable to pension contributors (PCs); give them a say (participation and inclusiveness) in how their fund is managed; and that PFAs are majorly in compliance with the rules established by PenCom on investment of pension funds. Implications of findings for practice and policy were pointed out and discussed. This is the first study that examines the impact of good governance on the investment performance of pension funds in Nigeria.