Role of Pension Fund Investments in Deepening the Nigerian Capital Market

Pension funds are among the largest institutional investors globally, and their investment strategies have a significant impact on capital market depth and liquidity. This study investigates the role of pension fund investments in deepening the Nigerian capital market for the period 2014 to 2022. Secondary data were obtained from the National Pension Commission annual reports and the Nigerian Exchange Group statistical database. Capital market deepening was measured by market capitalisation-to-GDP ratio, equity market liquidity, and government bond market turnover. Pension fund investment allocation was measured by the proportion of pension assets allocated to equities, federal government bonds, and real estate investment trusts. Multiple regression analysis and Granger causality tests were employed. Results showed that pension fund equity investment positively and significantly predicted market capitalisation-to-GDP ratio growth (coefficient = 0.31, p < 0.05). Government bond investments by pension funds significantly deepened the fixed-income market, with bond market turnover growing by 47% between 2016 and 2022 in parallel with increased pension fund participation. Granger causality confirmed that pension fund bond investments preceded capital market deepening with a one-year lag. The study concludes that pension fund investments are meaningful drivers of capital market development in Nigeria, and recommends broadening permitted investment asset classes for pension fund administrators to include infrastructure bonds and real estate investment trusts to further deepen market development. Keywords: pension fund investments, capital market deepening, National Pension Commission, institutional investors, Nigeria