Corporate Governance And The Financial Performance Of Pension Fund Administrators In Nigeria

Project and Seminar Topics with material for Banking and Finance
Abstract
This study was designed to empirically investigate the effect of corporate governance on the financial performance of pension fund administrators in Nigeria within the period of 2004 – 2014. The study employed the use of secondary data sourced from the websites and audited financial statements of pension fund administrators in Nigeria. For the purpose of the study, board size and board composition were used as the proxy for corporate governance and return on asset was used a proxy for the financial performance of pension fund administrators. These variables were then subjected to a multiple regression analysis using the Ordinary Least Squares (OLS) estimator at 5% level of significance with the return on asset as the dependent variable. From the study, it was found that board size has a positive and statistically insignificant relationship with the return on asset of pension fund administrators.
On the other hand, board composition measured by ratio of board members with financial expertise (experience in banking/investment, insurance and/or pension), to total number of the board members was found out to have a negative but no statistically significant relationship with the return on asset of pension fund administrators. This could be as a result of involving more board members who are not financial expertise in the board of pension fund administrators and as such, their decisions and their inexperience of financial matters tends to be detrimental to the performance of the pension fund administrators in Nigeria. The study therefore recommended that, in board composition, there should be a reduction in the number of board members who do not have financial expertise especially in the area of banking/investment, insurance and/or pension as this professional expertise is vital for high profitability of pension fund administrators in Nigeria.
Chapter One
Introduction
1.1 Background Of The Study
Corporate governance is the administrative arrangement whereby a nation or organization is segmented or broken into administrative units with well-defined roles stated in the constitution as the laws of the country or statute of the organization. The Nigeria nation started as a unit through the emergence of the missionaries and the British traders and its corporate arrangement started with the creation of southern protectorate which metamorphosed into a nation with the amalgamation of the two protectorates in 1914 by Lord Lugard was the governor general appointed by Britain (Esther, 2009). The corporate arrangement led to the introduction of Regional Government whereby Nigeria was divided into three regions namely: the west with headquarters at Ibadan, the East with headquarters at Enugu, and the North with headquarters at Kaduna. The regions increased to four with the creation of Midwest region in 1963 with the headquarters at Benin (Federal Republic of Nigeria constitution of 1990). The federated unit of Nigeria was changed from „region‟to state in 1967 when Gowon Administration divided Nigeria into 12 administrative units called States. It then grew to 19 state structure and finally 36 states, and the Federal Capital Territory Abuja at present. Corporate governance also refers to issues such as transparency, resolution of conflicts and the overall way in which the business in question is run. Governance also includes accountability and anti-corruption measures put in place by various operators or components (Musalem and Palacious, 2004). There cannot be governance in pension fund administration when pension contributors‟ funds are used to meet objectives other than retirement income objective. Corporate governance would be absent if workers‟ pension contributions are used as captive source of finance or lost due to corruption and mismanagement.
Many pension schemes had existed before the Pension Reform Act of 2004 in Nigeria. Ahmad (2006) opines that the first public sector scheme was the Pension Ordinance of 1951 with retroactive effect from January 1, 1946. This law provided public servants with both pension and gratuity. In 1961, the Nigeria Provident Fund was established by the Nigeria Provident Fund Act of the same year. This was replaced by the Nigeria Social Insurance Trust Fund (NSITF) that was created by the NSITF Act, 1993 (Akeni, 2006). The new pension scheme is a contributory scheme, publicly and privately managed. The public aspect is managed by National Pension Commission (Pencom), while the private aspect is managed by Pension Fund Custodians. Every eligible „employee‟ maintains a Retirement Savings Account in his name with the Pension Fund Administrator (PFA) of his choice. The employees always notify their employers of the PFA chosen and the identity of the Retirement Savings Account (RSA) opened. The employees and employers contribute a minimum statutory percentage of the employees‟ monthly emoluments (comprising basic salary, housing allowance and transport allowance) into the Retirement Savings Account of the employees.
The contributions would be managed and administered by Professional Fund Administrators and held in custody by licensed Pension Fund Custodians. At retirement, the amount in the employees‟ Retirement Savings Account would be the total contributions plus income and capital gain earned on the contributions made (Pension Act 2004). However, the public sector pensions were the defined benefit or a Pay As You Go (PAYG) system. They depended fully on government budgetary provisions for funding (Tuner, 2006). But these previous schemes did not provide the needed succour for our retirees. This was buttressed by Young (2007), when he stated that the previous schemes were characterised by fraudulent diversion of retirement pensions and outright nonpayment.
1.2 Statement Of The Problem
The problem that led old pension scheme to failure which was associated with the public pensions schemes include identification of pensioners, determination of amount of entitlements, reconciliation of government overall pension liability for budgetary and planning purpose. While commenting on the public pension debt burden, Balogun (2006) stated that the public pension could not be sustained as outstanding pension deficits amounted to over 2 trillion naira before 2004. Since the introduction of pension schemes in Nigeria, the old pension schemes was characterized by nonpayment of pensioners, embezzlement of the fund by pension officers and the huge amount of pension to be paid which constitute burden on government yearly budget, which then result to the failure of old pension schemes.
Sequel to the failure of old pension schemes, a new contributory pension scheme was introduced by the Pension Reform Act (PRA), 2004. It is aimed at developing a system that is sustainable and had the capacity to achieve the ultimate goals of providing a stable, predictable and adequate source of retirement income for each worker in the country. It is designed to be fully funded (by both the employee and employer), publicly and privately managed and based on individual accounts (Akeni, 2008). A fully funded pension fund is the one that has sufficient funds available to meet all future payment obligations (Cornetts, 2009). This study is therefore faced with the problem of investigating how the best practices in corporate governance affect the effective performance of contributory pension schemes in Nigeria so that it cannot fall like old pension schemes. Against this backdrop, this study examines the effect of Corporate Governance And The Financial Performance Of Pension Fund Administrators In Nigeria.
1.3 Objective Of The Study
The aim of this study is to examine Corporate Governance And The Financial Performance Of Pension Fund Administrators In Nigeria.
Specifically, the study will seek:
- To determine the effect of board size on the return on Asset of pension fund Administrators
- To determine the effect of board composition on the retun on Asset of pension fund administrators.
1.4 Research Hypothesis
H0: There is no significant relationship between board size and return on Asset.
Ho2: There is no significant relationship between board composition and return on Asset.
1.5 Significance Of The Study
This study serves as an evaluation tool to policymakers, pension fund administrators and the government. The findings from this study will aid in decision making by organizations. Also, the study will serve as a resource for further studies.
1.6 Scope And Limitation Of The Study
This study is limited to pension administrators, the variable choose are also limited in results. Hence, the findings from this study may not be applicable to organizations of unsimilar industries.
Chapter Five
Summary, Conclusion And Recommendations
5.1 Summary
The study is on the effect of Corporate Governance on financial performance of the Pension Administrators in Nigeria. The specific objectives of the study were to assess the impact of board size and board composition on financial performance of the Nigerian commercial the Pension Administrators. The analysis reveals that the Board Size has a negative but significance impact on the the Pension Administrators financial performance. This finding suggests that a smaller board size can enhance the Pension Administrators’ performance as the smaller size can take quick and adequate decision for the performance of the administrators as large boardrooms tend to be slow in making decisions, and hence can be an obstacle to change. Furthermore, the study reveals that the relative size of Non-Executive Directors has a positive and significant impact on the Pension Administrators performance. This suggests that the Pension Administrators with higher presence of non-executives or independent members in their boards perform better than the others the Pension Administrators.
5.2 Conclusion
This study focused on finding out the triggers of performance of the the Pension Administrators of which Corporate Governance proved to be an important issue for them. It has been established in selected literatures that corporate governance affects stakeholders and the the Pension Administrators as a whole, corporate governance affects the potential or ability of a the Pension Administrators to reach its market share both domestically and globally, corporate governance also determines the the Pension Administrators’ ability to fulfill its social objectives with its clientele and society at large. This study has also established that that corporate governance practices have measurable effects on the Pension Administrators operational performances. The study therefore concludes that weak corporate governance structure in Nigeria contributed immensely to the crisis experienced in Nigerian the Pension Administration.
5.3 Recommendations
Based on the discussion and conclusion above, the researchers recommend the following:
The Pension Administrators should engage in the development and implementation of strategic training for board members and senior the Pension Administrators managers. This should be carried out with special emphasis on corporate governance, corporate governance disclosure and the Pension Administrative ethics. They should regulate the size of the board which should not be too large and must consist of highly skilled and competent professional who are conversant with oversight function.
There should also be in existence, a proper internal control structure and self-government regulation so as to detect early rule violations and also monitor systemic problems for early remediation and solutions.
An effective legal framework should be developed by the legislature to regulate and specify the rights and obligations of a the Pension Administrators, its directors, and shareholders. Also such laws and regulations should specify disclosure requirements and enhance transparency and accountability. Also, Extra care and precautions should be employed by regulatory and supervisory institutions in the process of scrutinizing the books of account of the Pension Administrators. In addition, provisions should be made for more frequent examination of the the Pension Administrators’ operations.
Conclusively, the international codes of corporate governance should be properly adopted by Nigerian the Pension Administrators to meet the need of Nigerian governance environment.


The Complete Material Will Be Sent to You in Just 2 Steps
Quick & Simple…
![]()
Make Payment (Through Transfer) of ₦5,000 to the Account Below
![]() | Acc No: 0811003731 |
| Samphina Academy | |
| Current Account |
Or CLICK HERE To Pay With Debit Card
| FOR STUDENTS OUTSIDE NIGERIA | |
| CLICK HERE To Pay With Card ($15) | |
| FOR GHANA STUDENTS (GHS 100) | |
![]() | MTN MoMo |
| 0553978005 | |
| Douglas Osabutey | |
![]()
Send the Following Details on WhatsApp ( 07062590260 ) After Payment
- Payment Details
- TOPIC: Corporate Governance And The Financial Performance Of Pension Fund Administrators In Nigeria
The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply
Students Review
List of Related Works
Banker’s Role In Pension Fund Management In Nigeria
Challenges Faced By Retirees In Accessing Pension Funds
Impact Of Pension Fund Management On Economic Growth Of Nigeria
Appraisal Of Financial Reporting Practices Of Pension Fund Administrators In Nigeria
The Relationship Between Investment Strategies Of Pension Funds And Growth
Accounting For Pension And Gratuity In Public Sector (A Case Study Of Enugu State Civil Service)
The Impact Of Contributory Pension Scheme On The Nigerian Public
Impact Of Pension And Gratuity On The Life Of Retirees (A Study Of Enugu State Pension Board)
The Need For Reform In Public Pension Scheme In Nigeria
Contributory Pension Scheme And Its Impact On Retirees In Selected Public Organizations
Pension And Gratuity Administration In Nigeria: Problems And Solution
The Impact Of Contributory Pension Scheme On The Nigerian Economy
Pension Management And Administration In Nigeria: A Review Of The Pension Reform Act Of 2004
The Effect Of Corporate Governance On Organization Performance In Nigeria
Effect Of Corporate Governance On Earnings Management Practices Of Nigeria Quoted Companies
Corporate Governance And Ethics On The Nigeria Banking Industry: Challenges And Opportunity
Impact Of Corporate Governance On Banks Market Value In Nigeria
Audit Committee Attributes On Firm Value Of Listed Food And Beverage Firms In Nigeria
Enterprise Resource Planning (ERP): A New Paradigm In Corporate Governance
Ownership Structure And Corporate Governance And Its Effects On Performance
The Impact Of Corporate Governance And Risk Management On Bank Performance
Implications Of Poor Corporate Governance Practice On Banking System Stability In Nigeria
Impact Of Corporate Governance On Organizational Performance
Corporate Governance In The Nigerian Banking Industry
Impact Of Auditor’s Report On Corporate Governance (A Case Study Of Non-Financial Institutions)
The Effects Of Liquidity Risk On The Financial Performance Of Micro-Financial Institutions
Bank Lending Policies And Financial Performance Of The Nigeria Banking Industry
Financial And Economic Performance Of Nigeria
The Impact Of Accounting Metrics On The Profitability Of Listed Insurance Firms In Nigeria
Effects Of Corporate Image On Financial Performance Of Insurance Companies In Nigeria
Effect Of Dividend Policy On Shareholders Wealth On Listed Industrial Goods Companies In Nigeria
Capital Budgeting And Financial Performance Of Listed Manufacturing Firms In Nigeria
Effect Of Liquidity On The Performance Of The Nigerian Banking Sector
The Impact Of Corporate Governance On The Insurance Sector: A Case Study Of AIICO Insurance Plc
Corporate Governance Mechanism And Financial Performance Of Listed Insurance Companies In Nigeria


