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1.1 Background 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:
1. Change in the remuneration of the jobs.
2. The rate of inflation.
3. The prevailing interest rate in the economy.
4. The size, survival, profitability, and future solvency of the employee.
5. 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:
1. Overdependence on budgeting pension.
2. Weak, inefficient and poor staffing/equipment and administration.
3. Low compliance level from private sector.
4. Inadequate pension.
5. 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:
i) Examine whether pension fund investment leads to economic growth of Nigeria.
ii) Determine the effects of income from pension on economic growth.
iii) 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.
1. Does pension fund investment lead to economic growth of Nigeria?
2. Does income from pension fund have effect on economic growth of Nigeria?
3. Is economic growth driven by pension welfare?
1.5 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.
1.6 SCOPE AND LIMITATION 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 (PENCOM) and National Bureau of Statistics (NBS) for the period spanning from 2009-2013.
In the cause of the study, the researcher encounters some limitations which limited the scope of the study;
Staff Reluctance: In most cases the staff of the used study often feels reluctance over providing required information required by the researcher. This result in finding information where the structured questionnaires could not point out.
Researcher’s Commitment: The researcher, being of full time student spent most of her time on other academic activities such as test, class work, assignment, examination etc which takes average focus from this study.
Inadequate Materials: Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.
1.7 DEFINITION OF TERMS
Impact: is defined as the action of one object coming forcibly into contact with another or a marked effect or influence.
Pension:A pension is a fund into which a sum of money is added during an employee's employment years, and from which payments are drawn to support the person's retirement from work in the form of periodic payments.
Fund:Funding is the act of providing financial resources, usually in the form of money, or other values such as effort or time, to finance a need, program, and project, usually by an organization or government
Fund management:Funds management is the management of the cash flow of a financial institution. The fund’s manager ensures that the maturity schedules of the deposits coincide with the demand for loans.
Economic growth:Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another.
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