ABSTRACT

This project topic titled “ACTUARIAL ANALYSIS OF INVESTMENT RISK IN NIGERIAN PENSION FUNDS: DEFINED CONTRIBUTION SCHEME” aims to comprehensively assess the various dimensions of investment risk faced by Nigerian pension funds. The study focuses on three main aspects of risk: interest rate risk, mortality and longevity rate risk, and market volatility risk. The study seeks to compare between the traditional Defined Benefit pension scheme and the Defined Contribution pension scheme in Nigeria. Using an ex-facto research design, data from 8 pension fund companies operating in Nigeria over a ten-year period (2012-2022) were analyzed through panel regression analysis.

The findings suggested a rather strong relationship between market volatility, mortality risk and investment risk, which was the dependent variable of the study. Interest rate risk, which was the third independent variable of study, did not impact significantly on the dependent variable of investment risk within the period of investigation. However, the variable of interest rate risk did  not have significant relationship with investment risk, over the period, implies that whether it increases or decreases over the period, does not affect investment risk, and will not cause it to either decrease or increase within the period of estimation.

The study recommends, among others, that further studies should incorporate other variables that are not included in the present study. Such variables may include PFAs returns on pension fund, as a measure of performance of operations.