Pension Funds in Africa: A Comparative Study on Pension Funds in Gambia, Ghana, and Nigeria

Abstract

Introduction This thesis is dedicated to studying pension funds in Africa, concentrating on only three selected countries; The Gambia, Ghana, and Nigeria. An overview study was conducted to review the types of pension funds in three selected countries. The review has revealed that in the case of Gambia, there exist only three common pension funds; Public Service Pension Scheme (PSPS), National Provident Fund (NPF), a defined contribution scheme, and the Federated Pension Fund (FPF), a defined benefit scheme. In the case of Ghana, they have a three-tier contributory scheme instituted by the National Pension Act 766 in 2008. This type of scheme covers almost all pension schemes in Ghana by integrating both the public and private sector schemes. The three-tier scheme is divided into three pillars; The first pillar is a defined benefit scheme compulsory for all formal workers in Ghana. An empirical analysis was conducted on pension fund performance in the three selected countries. A multiple regression analysis was used to study the factors that affect pension funds in the three selected countries. The analysis was done individually for all the countries. Return on investment was used as the dependent variable to measure performance. The independent variables were life expectancy, Deposit interest rate, personal transfers, the population age 65 and above, and general government expenditure. The regression results found that in all the three models, the deposit interest rate is the most important determinant of return on investment (Pension fund performance). Life expectancy and general government expenditure were not statistically significant in all three models. Also aging population has a negative impact on returns for both Gambia and Nigeria. However, it has a statistically insignificant effect on returns on investment for Ghana. In comparison, the regression analysis revealed that the most important factor that affects performance in Nigeria and Ghana is the deposit interest rate (a proxy for interest rate). While in the case of Gambia, Interest rate, personal transfer, and aging population are the key determinants of performance in pension Funds.