Contributory Pension Fund Administrations in Nigeria: Stochastic Frontier Analysis of Its Efficiency and Implications for Policy Designs
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Date
2019
Journal Title
Journal ISSN
Volume Title
Publisher
Journal of Financial Risk Management
Abstract
The study assessed the technical efficiency of pension fund administrators in
Nigeria using Stochastic Cost Frontier Model to generate efficiency scores for
each of the eleven (11) selected pension fund administrators from a population
of twenty-one (21). Panel data gathered from the annual reports of the
selected pension fund administrators and the National Pension Commission
were analysed using the maximum likelihood technique. The result showed
that inefficiency, in varying degrees, existed in the selected fund administrators
due to input costs on labour, equipment and premises and the mean and
median efficiency scores were about 75% and 72% respectively. While the
most efficient pension fund administrator recorded inefficiency score of
0.077, the least efficient pension fund administrator had inefficiency score of
0.388. The study concluded that increase in profitability, number of contributors,
engaging in open fund investment activities and merger and acquisition
reduce operating cost. It was therefore recommended that there should
be a regulator-initiated merger and acquisition in the industry to eliminate
waste, with positive impact on investment income. Besides, the regulatory
agency should ease and expand transfer windows for existing contributors to
transfer their pension contributions from an inefficient pension manager to
efficient one to engender competition in the pension industry.
Description
Staff Publication
Keywords
Pension Fund,, Frontier Analysis,, Efficiency,, Nigeria,, Pension Reform
Citation
Ololade, B. M., Adegboye, A. A., & Salawu, R. O. (2019). Contributory Pension Fund Administrations in Nigeria: Stochastic Frontier Analysis of Its Efficiency and Implications for Policy Designs. Journal of Financial Risk Management, 8, 333-348. https://doi.org/10.4236/jfrm.2019.84023