Can Nigerian RSA’s Beat Inflation?

Abstract

This paper aims to review and replicate the performance of the funds managed under the 2004 Pension reform act (“Old Act”) of Nigeria and its subsequent repeal. I utilise Ordinary Least Squares (“OLS”) regression analysis in an attempt to replicate the returns on Net Asset Values (“NAV”) published by some of the Licensed Pension Fund Administrators (“PFA”). The Old Act allows for active fund management of both equity and ?xed income instruments on Nigerian assets. I attempt to replicate the published NAV results using four Nigerian ?nancial instruments to ascertain if passive alternatives to active management by the PFA’s at lower cost and transaction fees can be created. The performance of 10 Nigerian PFA’s run by fund managers in the period December 2006 to December 2014 is reviewed and presented.The evidence from this study indicates that the performance of the 10 PFA’s cannot be replicated using four simple financial instruments. Since the Old Act allows for an allocation of up to 80% of assets in bonds, a simple t test is performed to ascertain whether PFA’s mark to market their portfolio’s adequately.

Keywords: Pension Funds, Nigeria, PFA’s, T Test, Out-Performance.