Effect of Inflation on Pension Fund Investment in Federal Government Securities in Nigeria

Abstract

This study investigated the effect of inflation on pension fund investment in federal government securities in Nigeria utilizing time series data spanning from 2007 to 2019. Ex-post facto was the research design used in the study. Secondary data for the period were collected from the National Pension Commission Annual Reports and Central Bank of Nigeria Statistical Bulletin. Data collected were analyzed and tested for unit root, using the Augmented Dickey-Fuller test. While Ordinary Least Square (OLS) estimation technique was used to test the hypothesis. The result revealed that inflation rate did not significantly impact on pension fund investment in federal Government Securities in Nigeria. This result implies that pension funds invested in federal government Securities yield adequate return on investment capable of withstanding the adverse effect of rising rate of inflation in Nigeria. This could be that, the volumes of monthly pension contributions channeled into Federal Government Securities actually cover the effect of inflation on pension fund investment in federal government securities in Nigeria. Based on the findings of the study, it was concluded that inflation did not significantly impact on pension fund investment in federal government securities in Nigeria. In line with the findings of the study, it was recommended that Nigerian Pension Industry should continue to advocate that policy makers target reduction in the monetary policy rate and also stabilize the value of Naira in order to enhance actual value of pension benefits in the long run. Also, the National Pension Commission should differentiate the monthly contributions that come into the pension fund investment in the annual report so as to determine the actual return on investment of various securities where pension fund is invested.