Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

Gusau Journal of

Accounting and Finance
(GUJAF)

Vol. 3 Issue 3, October, 2022 ISSN: 2756-665X

A Publication of

Department of Accounting and Finance,

Faculty of Management and Social Sciences,

Federal University Gusau, Zamfara State -Nigeria

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

Vol. 3 Issue 3

October, 2022

ISSN: 2756-665X

A Publication of

Department of Accounting and Finance,

Faculty of Management and Social Sciences,

Federal University Gusau, Zamfara State -Nigeria

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Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

iii

EDITORIAL BOARD

Editor-in-Chief:

Prof. Shehu Usman Hassan

Department of Accounting, Federal University of Kashere, Gombe State.

Associate Editor:

Dr. Muhammad Mustapha Bagudo

Department of Accounting, Ahmadu Bello University Zaria, Kaduna State.

Managing Editor:

Umar Farouk Abdulkarim

Department of Accounting and Finance, Federal University Gusau, Zamfara State.

Editorial Board

Prof.Ahmad Modu Kumshe

Department of Accounting, University of Maiduguri, Borno State.

Prof Ugochukwu C. Nzewi

Department of Accounting, Paul University Awka, Anambra State.

Prof Kabir Tahir Hamid

Department of Accounting, Bayero University, Kano, Kano State.

Prof. Ekoja B. Ekoja

Department of Accounting, University of Jos.

Prof. Clifford Ofurum

Department of Accounting, University of PortHarcourt, Rivers State.

Prof. Ahmad Bello Dogarawa

Department of Accounting, Ahmadu Bello University Zaria.

Prof. Yusuf. B. Rahman

Department of Accounting, Lagos State University, Lagos Stat

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

Prof. Suleiman A. S. Aruwa

Department of Accounting, Nasarawa State University, Keffi, Nasarawa State.

Prof. Muhammad Junaidu Kurawa

Department of Accounting, Bayero University Kano, Kano State.

Prof. Muhammad Habibu Sabari

Department of Accounting, Ahmadu Bello University, Zaria.

Prof. Okpanachi Joshua

Department of Accounting and Management, Nigerian Defence Academy, Kaduna.

Prof. Hassan Ibrahim

Department of Accounting, IBB University, Lapai, Niger State.

Prof. Ifeoma Mary Okwo

Department of Accounting, Enugu State University of Science and Technology,

Enugu State.

Prof. Muhammad Aminu Isa

Department of Accounting, Bayero University, Kano, Kano State.

Prof. Ahmadu Bello

Department of Accounting, Ahmadu Bello University, Zaria.

Prof. Musa Yelwa Abubakar

Department of Accounting, Usmanu Danfodiyo University, Sokoto State.

Prof. Salisu Abubakar

Department of Accounting, Ahmadu Bello University Zaria, Kaduna State.

Dr. Isaq Alhaji Samaila

Department of Accounting, Bayero University, Kano State.

Prof. Fatima Alfa

Department of Accounting, University of Maiduguri, Borno State.

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

Dr. Sunusi Sa'ad Ahmad

Department of Accounting, Federal University Dutse, Jigawa State.

Dr. Nasiru A. Ka’oje

Department of Accounting, Usmanu Danfodiyo University Sokoto State.

Dr. Aminu Abdullahi

Department of Accounting, Usmanu Danfodiyo University Sokoto, State.

Dr. Onipe Adebenege Yahaya

Department of Accounting, Nigerian Defence Academy, Kaduna State.

Dr. Saidu Adamu

Department of Accounting, Federal University of Kashere, Gombe State.

Dr. Nasiru Yunusa

Department of Accounting, Ahmadu Bello University Zaria.

Dr. Aisha Nuhu Muhammad

Department of Accounting, Ahmadu Bello University Zaria.

Dr. Lawal Muhammad

Department of Accounting, Ahmadu Bello University Zaria.

Dr. Farouk Adeiza

School of Business and Entrepreneurship, American University of Nigeria, Yola.

Dr. Bashir Umar Farouk

Department of Economics, Federal University Gusau, Zamfara State.

Dr Emmanuel Omokhuale

Department of Mathematics, Federal University Gusau, Zamfara. State

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

ADVISORY BOARD MEMBERS

Prof. Kabiru Isah Dandago, Bayero University Kano,Kano State.

Prof A M Bashir, Usmanu Danfodiyo University Sokoto, Sokoto State.

Prof. Muhammad Tanko, Kaduna State University, Kaduna.

Prof. Bayero A M Sabir, Usmanu Danfodiyo University Sokoto, Sokoto State.

Prof. Aliyu Sulaiman Kantudu, Bayero University Kano, Kano State.

Editorial Secretary

Usman Muhammad Adam

Department of Accounting and Finance, Federal University Gusau, Zamfara State.

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

vii

CALL FOR PAPERS

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Zamfara State Nigeria The Journal accepts papers in all areas of Accounting and

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Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

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PUBLICATION PROCEDURE

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Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

CONTENTS

Capital Structure and Firm Financial Performance of Listed Deposit Money

Banks in Nigeria: Moderating Effect of Board Financial Literacy

Anas Idris Abdulwahab, Hussaini Bala Ph.D,

Mansur Lubabah Kwambo Ph.D, & Abubakar Adamu 1

Influence of Socialization On MSME Compliance by Mediating

Understanding and Moderating Knowledge of Tax Visits

Yayuk Ngesti Rahayu 17

Does International Financial Reporting Standard Narrows Audit

Expectation Gap?

Musa Ibrahim Dauda, Ibrahim Adagye Dauda, PhD 35

Sustainability Reporting and Financial Performance of Listed

Manufacturing Firms in Nigeria

Aiyesan, Olabode Olutola Ph.D 49

Firm Attributes and Financial Reporting Timeliness of Listed

Consumer Goods Firms in Nigeria

Akume James Terkende, Dele Ikese Karim 67

Value Relevance of Accounting Information for Listed Financial

Service Firms in Nigeria

Kassim Busari, Ishaya Luka Chechet Ph.D,

Aliyu Ahmed Abdullahi Ph.D, & Ibrahim Mohammed Ph.D 87

Nigeria Economic Growth and Capital Market Development:

Does Contributory Pension Scheme Matter?

Akinwumi Ayorinde Olutimi, Toluwa Celestine Oladele Ph.D,

&Adeboye Emmanuel Sanmi 101

Audit Committee and Financial Reporting Quality: The Moderating

Effect of Board Independence of Listed Deposit Money Banks

in Nigeria

Kassim Yusha’u Shika, Mark David Kantiyok 117

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

Determinants of Financial Performance of Listed Deposit Money Banks

in Nigeria

Mary Seansu Lazarus, Nurradden Usman Miko Ph.D,

& Saifulahi Abdullahi Mazadu Ph.D 140

Human Resource Accounting and Profitability of Listed DepositMoney

Banks in Nigeria

Ahmad Adamu Ibrahim, Ahmad Rufa’I Adamu,

Fatihu Mahmud Alhassan &Muhammad Iliyas Abdulsalam 158

Board Independence, Audit Effectiveness and The Quality of Reported

Earnings in The Nigerian Consumer Goods Firms

Isah Shittu Ph.D, Misbahu, Abubakar Muhammad 175

Impact of Capital Structure On Financial Performance of Listed Agricultural

Companies in Nigeria

Ahmad Muhammad Ahmad, Shehu Usman Hassan Ph.D.,

&Abubakar Abubakar 192

Trade Oriented Money Laundering and Era of Cybersecurity Tax Evasion

in Nigeria

Oluwayemi Joseph Kayode, Adewole Joseph Adeyinka Ph.D,

Adewale Abass Adekunle & Kadiri Kayode Ph.D 205

Effect of Females in the Boardroom on Corporate Sustainability Reporting

Salami Suleiman Ph. D, Olanrewaju Atanda Aliu Ph.D 224

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

101

NIGERIA ECONOMIC GROWTH AND CAPITAL MARKET

DEVELOPMENT: DOES CONTRIBUTORY PENSION SCHEME

MATTER?

AKINWUMI Ayorinde Olutimi

The Administrative Staff College of Nigeria (ASCON).

ayotomiwa2011@gmail.com, +2348030431713.

Toluwa Celestine Oladele Ph.D

Department of Banking and Finance

University of Ibadan, Nigeria

toluphil51@gmail.com, +2348068991525.

ADEBOYE Emmanuel Sanmi

The Administrative Staff College of Nigeria (ASCON).

wadeboye@yahoo.com, Phone: +2348074285797

Abstract

Whether the contributory pension scheme (CPS) has addressed the shortage of capital for

investments, the challenge of full compliance with the system and the shortage of investment outlets

spurred the interest to investigate the impact of the CPS on capital market development and

economic growth from 2005 to 2021. Secondary data was adopted for this study, and the data were

extracted from the National Pension Commission and world development indicators. The study

employed the auto-regressive distribution lag (ARDL) model as an estimation technique. The

empirical results show that among the proxies for gross domestic product, total pension fund asset

(TPFA) was significant in both the short and long run, which showed that a 1% increase in TPFA

would produce a 0.0028% increase in the GDP. Also, among the proxies for capital market

development, total pension fund asset (TPFA) was significant in both the short and long run, which

showed that a 1% increase in TPFA would produce a 0.024% increase in capital market

development. Based on these findings, the study concluded that CPS influenced capital market

development and economic growth. Consequently, this study recommended, among others, that the

NPC should continue to partner with relevant stakeholders such as pension fund administrators and

custodians by making its investment regulations more flexible and encouraging increased pension

fund investments.

Keywords: Capital Market, Economic Growth, Contributory Pension Scheme, ARDL.

DOI: https://doi.org/10.57233/gujaf.v3i3.183

1. Introduction
The world's pension issue was credited to the French and British governments when

they made special provisions for public servants (Haruna, Makama & Daniel,

2015). Pension in Nigeria Public Service came into being with the enactment of the

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https://doi.org/10.57233/gujaf.v3i3.183

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

102

pension ordinance of 1951 during the British colonial era with retrospect effect

from January 1, 1946 (Barrow, 2008; Nafisat, 2015). Consequently, the pension

programme was modelled after the British structure, where the government or

employer set aside funds to provide colonial retirement benefits to its staff. Other

decrees were promulgated following the 1958 Pension Act to cater for different

categories of workers, such as the private sector, police, agencies and the armed

forces (Gunu &Tsado, 2012). These decrees, which remained operative laws in the

public service and the military pension in Nigeria until 2004, were known as

Defined Benefit (DB) or Pay-As-You-Go Scheme. The federal government

supported it through financial allocation, and the pension division of the office of

the head of service of the federation oversaw its administration (Balogun, 2016).

The old pension schemes were met with notable and decisive defeats following the

attendant challenges and problems that marred their successful operations. They

include lack of adequate and untimely budgetary provisions, increase in salaries

and pensions, lack of effective regulation and supervision of the system, it was

poorly funded or unfunded, owing to inadequate budget allocations, corruption and

pension liabilities estimated to be about N2 trillion, in addition to too many private

sectors not been covered by the scheme. (Haruna, Makama & Daniel, 2015;

Yunusa, 2009).

Due to the failure of the old scheme, a new pension scheme, known as the pension

reform act (PRA) 2004 or contributory pension scheme (CPS), became a reality to

ameliorate the inadequacies of the old pension scheme thereby gearing the economy

towards growth (Farayibi, 2015). It established a uniform pension system for both

the public and private sectors, respectively. It also made it mandatory for employers

and employees of both private and public sectors to contribute to employees'

retirement benefits, coupled with establishing an Agency to regulate all pension

matters in the country (Asekunowo, 2009; Gunu & Tsado, 2012). The CPS is

relevant to Nigeria's capital market development and economic growth by growing

its pension assets from N649.92 billion in 2006 to N13.42 trillion in December 2021

(PenCom, 2022). Therefore, it is credible that the introduction of CPS could serve

as a tool for realising savings mobilisation goals, contribute to the development of

the capital markest and impacting positively on the economic growth (Price

Waterhouse Coopers, 2016).

However, a significant concern is whether the CPS has achieved the above

milestones on the one hand, and on the other hand, whether it has significantly

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

103

impacted the nation's domestic capital market and economic growth respectively.

Consequently, there are still questions on whether the CPS introduction has

addressed the scarcity of funds for long-term investments in Nigeria and whether

this fund as gone a long way in impacting the capital market and eventually

engendering economic growth. This is because many pension funds are yet being

taken as Government Bonds (PenCom, 2016). As a result, many private and public

sectors are refusing the scheme (Maduekwe, 2015; James, 2013; Al-Faki, 2006 &

Achimugu, Ocheni & Akabo, 2015). Studies (Balogun, 2006; Ogwumike, 2008;

Osaze, 2000 & Vitas, 2000) expressed confidence about the contributory pension

scheme's potential to mobilise savings. Notwithstanding, as of 2014, full

compliance with the PRA 2004 amended remained low. Also impacting capital

market development and economic growth is the shortage of investment outlets.

The objectives of the PRA 2004 restrict pension contributions held by the pension

fund custodians and administered by pension fund administrators (PFAs) to limited

categories of investment outlets. This has continued to inhibit the PFA managers'

investment decision-making performance (BGL Report, 2010). The implication is

that a large portion of pension funds contributions are left un-invested, and the

consequence is that there will be a diminution in income accruing to contributors.

To further worsen the above problem, is the underdevelopment of the capital

market. Over 70% of the total market capitalisation belongs to the top twenty

companies; thus, there would be a pool of pension funds chasing a few quality

investments (Gunu &Tsado, 2012).

The PRA 2004 adopted the Chilean Pension model with an expectation of capturing

the potential of millions of contributors, making the pension industry the most

potent buy-side investor in the country (BGL Report, 2010). However, the reality

is very different. Employee and employer compliance has been a significant

challenge to PRA 2004. This can be due to the knowledge gap and general

misconception (Odia & Okoye, 2012). Despite the informal sector reportedly

employing over 35 million Nigerians, there are no strict procedures to assure

compliance (Nwanne, 2015). Only 9.55 million contributors, or 13.70% of the

69.68 million people employed in the official and informal sectors, have cooperated

with the programme. This suggests that the PRA 2004 purposefully left an

opportunity for the scheme's noncompliance (NBS, 2021).

Many studies (Walker & Lefort, 2002; Mesike & Ibiwoye, 2012; Gunu & Tsado,

2012; Romer 2006; Stiroh, 2003; Iyiola, Munirat & Nwufo, 2012; Okoro, 2014;

Alejandro & Mark, 2016; Meng & Pfau, 2010) have examined contributory pension

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

104

schemes, capital market development and economic growth. They opined that the

CPS is a backbone for mobilising savings and, by implication, developing the

domestic capital market and fostering the country's economic growth. Nevertheless,

their studies did not adequately consider some salient economic factors such as

stock market liquidity, interest rate, exchange rate, increase in the labour force,

gross capital formation and technology growth. In this regard, this study covered

the above gap. Following these arguments, this study investigates whether the CPS

is a catalyst for capital market development and economic growth. As a result, the

above arguments gave rise to the following research questions: What is the

contributory pension scheme's impact on the Gross Domestic Product? To what

extent does the contributory pension scheme affect the Nigeria capital market?

Hence, to answer the research questions above, the following hypotheses were

formulated:

H01: Contribution Pension Scheme has positive and significant impact on Gross

Domestic Product.

H02: Contribution Pension Scheme will lead to a significant improvement in the

Nigerian Capital Market.

This study covered the period from 2005–2021. This is because the CPS was

enacted into Nigerian law on June 25, 2004, and the licences for the administrators

of pension schemes were issued on March 5, 2005. (Maduekwe, 2015). The

findings of this study will be useful to pension regulatory authorities and other

stakeholders in their policy formulation. This study will also be a platform for

future research and expanding intellectual frontiers.

2. Literature Review
Empirical Evidence

Levine (1991) investigated growth, taxation, and stock markets. A thorough

literature analysis was conducted as part of the study to highlight the role financial

markets play in economic growth. The study developed an endogenous growth

model to explain this association better. The study also showed that stock markets

foster growth by enabling enterprises to exchange ownership without interfering

with internal production processes and enabling firms to diversify their portfolios.

It concluded that tax policy affects growth directly by altering investments and

indirectly by changing financial contracts' incentives.

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

105

Catalan, Wilbert, Kenneh, Friedman, and Paddison (2000) findings showed that

contractual savings institutions like pension funds cause capital market growth.

Furthermore, growing contractual savings sectors' potential benefits were more

substantial for developing countries than developed countries. The influence of

Nigeria's CPS on economic growth was examined by Gunu and Tsado (2012).

Findings revealed that the ratio of pension funds to total market capitalisation

gradually increased marginally from 2007 to 2010, showing that the contributory

pension system has improved the mobilisation of savings, which translates to

economic growth. Using the error correction model (ECM) technique, Mesike and

Ibiwoye (2012) investigated whether pension reform will accelerate the growth of

Nigeria's financial industry. According to the performance analysis of all the

factors, the reform phase produces long-term contractual savings and encourages

the growth of the securities market.

Madukwe (2015) assessed the importance of the link between Nigeria's market

capitalisation (MC), ordinary local share (LOS) of the contributory pension plan,

and pension asset under management (AUM). The study additionally used a

pairwise correlation model. According to the study, the contributory pension plan

had no discernible influence on Nigeria's capital market. It was determined that the

national contributory pension scheme's money pool was invested and distributed

among various assets. However, it had no appreciable impact on the expansion of

the Nigerian capital market throughout the period under consideration.

Nwanne (2015) investigated the effect of Nigeria's contributory pension plan on

economic development using the ordinary least square (OLS) regression approach.

Findings showed that while pension deposits have a favourable and considerable

influence on economic development, pension funds have a negative impact. It was

suggested that pension funds should broaden their investment options and increase

their compliance and mobilisation of participants' savings efforts.

Farayibi (2015) examined the impact of the functioning of the funded pension

system since its beginning in 2004 on economic development in Nigeria. Findings

showed that Nigeria's commercial and governmental sectors dramatically expanded

their contributions to pension funds, creating a sizable investment pool for the

capital and money markets. The study found that, with prudent risk and portfolio

management by pension administrators and custodians, contributory pensions might

increase Nigeria's Gross Domestic Product (GDP).

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

106

Edogbanya (2013) examined the impact of contributory pension scheme on

Nigerian economic development. The objective of this study was to examine how

contributory pension scheme influence the Gross Domestic Product (GDP) in

Nigeria. The main problem of the study was centred on the nature and effect of risk

prevailing in the pension assets management. Data were collected from both

primary and secondary sources and analyzed using percentage. The research work

adopted correlation analysis for testing secondary data and ANOVA for the primary

data. The result of correlation analysis using t-test revealed that Contributory

Pension Scheme (CPS) has significant impact on the GDP while the result of

ANOVA revealed that risk prevalent has positive effect on the pension fund

management. The researcher therefore, recommends that the Pension Fund

Administrators should invest in less risky portfolio to enhance prompt payment of

pension to retirees.

Adeoye (2015) did an evaluation of the pension industry in Nigeria. The paper

assessed the success and challenges of pension industry in Nigeria, as a result of

various reforms that had taken place. The study made use of both primary and

secondary source of data. Findings from the study showed that the pension Reform

Act (PRA) 2004 make it possible for the industry to grow. Moreover, the empirical

evidence showed that there was a positive relationship between Contributory

Pension Scheme (CPS) and Gross Domestic Product (GDP).

Bijlsma, Bonekamp, Ewijk and Haaijen (2017) in their paper; funded pensions and

economic growth, analyzed the impact of funded pensions on capital markets and

economic growth. They opined that if larger savings through funded pensions lead

to deeper capital markets, this can be expected to have a positive effect on economic

growth in particular for firms that rely on external finance. In their study, they used

differential impact on firms with less or more external finance to study the effect of

pension saving on economic growth. The study used data for 69 industrial sectors

in 34 OECD countries for the period 2001-2010, findings from the study showed a

significant impact of pension assets on growth in sectors that are more dependent

on external financing. For a sector with average external dependence an increase in

the pension assets to GDP ratio by one standard deviation (40 percentage points)

increases growth by 0.24 percentage points.

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

107

3. Methodology
Model Specification

The model for this study is rooted in Solow growth theory and Calderon-

Rosellmodel. The first model is based on the augmented Solow growth model

modified by Mankiw, Romer and Weil (1999).

Model 1

The original model by Mankiw et al. (1999) is stated as:

In(
Yt

)= In A0 + gt + syt – (n+g+ ð)Kt
𝐿𝑡

(1)

Mankiw et al. (1999) modified the Solow growth model by adding A0as vector,

which allows the inclusion of variables of interest
Where (

Yt
) = output per capita, A0= initial level of technology and other factors,

𝐿𝑡

gt= technological progress, g= rate of technological progress, s= rate of savings, n=
growth in the labour force.
λ = syt – (n+g+ ð)Kt…………………………………………………….(2)

In this study λ proxy capital formation

In(
Yt

)= InA0 + gt + λ…………………………………………………… (3)
𝐿𝑡

The study modified equation 3; the dependent variable becomes economic growth
(GGDPP), and the vector A0is expanded to accommodate those variables of interest

to the research work. The vector A0 is expanded and stated as;
InA0 =β0 + β1EXCH + β2lnGLR + β3InTPFA + β4InMC + β5INT ----------(4)

Substituting equation 4 into 3 while the dependent variable is replaced with

economic growth

InGGDPPt=β0+ β1EXCHt + β2InGLRt + β3InTPFAt + β4InMCt + β5INTt + β6Ingtt
+ β7Inλt+ εt

Where: GGDPP= Economic growth; EXCH= Exchange rate; GLR= growth in the

labour force

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

108

TPFA= Total pension fund asset for the period; MC= Market capitalization; INT=

Interest rate

λ = Gross capital formation; and gt= technology progress.

Model 2

The second model, which addressed capital market development, is based on the

Calderon-Rosell model. Calderon-Rossell (1991) developed a model or theory that

explored capital market development's main determinants. This model is one of the

most comprehensive efforts to lay the groundwork for a financial theory of the

growth of capital markets. The main indicators in this approach are economic

growth and stock market liquidity. The model is stated as:

MCD = SML, GGDPP …………………………………………………….(6)

MCD= Capital Market Development; SML = Stock Market Liquidity

GGDPP = Economic growth

The model is modified to allow the inclusion of other variables of interest. Thus it

is stated as:
MCD = β0+ β1SMLt + β2InGGDPPt + β3InTPFAt+β4InGCFt+ β5INTt + εt-----(7)

MCD= Market Capital Development; SML=Stock Market Liquidity; INT= Interest

rate

GGDPP= Growth GDP per capita; TPFA= Total Pension Fund Asset; and GCF=

Gross Capital Formation

Equations 5 and 7 were used to achieve the objectives of this study

β= Intercept; t= Time Period εt = error term β1–β7&β1–β5 =

Parameters

The study employed the autoregressive distribution log (ARDL) as the estimation

technique. Ex-post facto was employed for the research design. Ex-post facto does

not give the researcher direct control of variables because their manifestations have

already occurred or because they are inherently not easily manipulated. This study's

time series data were obtained from various sources, including the National Pension

Commission Annual Reports and World Development Indicators. It is expected that

β1–β7&β1–β5, which are parameters in equations 5 and 7, will contribute positively

to both the capital market development and economic growth.

Gusau Journal of Accounting and Finance, Vol. 3, Issue 3, October, 2022

109

4. Data Analysis and Interpretation of Results
Pre-Estimation Test

According to Pesaranet al. (2001), to avoid spurious results, it is imperative to

conduct pre-estimation before determining the estimation technique. Therefore, the

parameter estimates were subject to various econometric tests. Thus, the study

employed Augmented Dickey-Fuller (ADF), Unit Root Test, Auto-Regressive

Distribution Lag (ARDL) bound test and Error Correction Model (ECM) as

estimation techniques.

Table 2: Test for Stationarity
Variable ADF Statistics 1% critical value P-Value Stationarity

∆GDPP -5.128885 -3.610453 0.0001 I(0)

D(CMD) -6.890903 -3.615588 0.0000 I(1)

D(EXCH) -6.101799 -3.615588 0.0000 I(1)

DGCF -4.743700 -3.610453 0.0004 I(0)

D(∆LF) -11.81686 -3.621023 0.0000 I(1)

D(PTFA) -4.648318 -3.615588 0.0006 I(1)

INT -5.507968 -3.610453 0.0000 I(1)

D(SML) -7.420748 -3.615588 0.0000 I(1)

Source: Author's computation, 2022.

Augmented Dickey-Fuller (ADF) Unit Root Test was conducted to test the order

of Stationarity of the variable. Table 2 shows that the variables were a

combination of I(0) and I(1)

The Analysis of Long-run Relationship (ARDL BOUNDS TEST)

Since the variables of the model are the combination of the I(1) and I(0) series

ARDL bound test is the most suitable for testing of long-run relationship (Pesaranet

al.,2001)

Table 3: Cointegration Test for the two Models

Null Hypothesis: No long-run relationships exist

ARDL (2, 0, 0, 0, 0, 2, 1) Model 1 ARDL (1, 1, 1, 0, 1, 0) Model 2

Test Statistic Value Test Statistic Value

F-statistic 4.76 F-statistic 4.51

K 7 K 5

I1 Bound 3.61 I1 Bound 3.79

I0 Bound 2.45 I0 Bound 2.62

Source: Author's computation, 2022.

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110

Significance Level (5%)

The result of the ARDL Bound Test displayed in Table 3 shows that the null

hypothesis of no long-run relationshipat5%statistical significance level will be

rejected for the two models because the value of the F-Statistic in model 1(4.76)

and model 2 (4.51) are more significant than the I1 bound value (3.61) and (3.79)

respectively when ∆GDPP (growth GDP per capita) and CMD (capital market

development) are treated as the dependent variables for model 1 and 2 respectively.

Accordingly, it can be concluded that there exists a long-run equilibrium

relationship between the variables in the two models in this study.

Table 4: The result of the Short-run and Long-run Coefficients of the ARDL

Short-run Coefficient

Variable Coefficient Std. Error t-Statistic Prob.

D(LogGDP(-1)) 0.275765 0.152833 1.804353 0.0828

D(EXH) -0.031267 0.010802 -2.894584 0.0076

D(LogLF) 0.011251 0.001545 1.374117 0.1811

D(LogPTFA) 0.002995 0.001065 2.812206 0.0317

D(LogCMD) 0.257795 0.092624 2.783248 0.0099

D(RINTR) 0.163832 0.045511 3.599825 0.0013

D(RINTR(-1)) -0.120546 0.051137 -2.357323 0.0262

D(LogGCF) -0.532599 0.392904 -1.355546 0.1869

CointEq(-1) -0.706606 0.262662 -6.497347 0.0000

Cointeq = _GDP - (-0.0183*EXH + 0.0000*LABOUR -0.0018*PTFA + 0.1511

*CMD + 0.2560*RINTR -0.0320*GCF + 2.2961 )

Long Run Coefficients

Variable Coefficient Std. Error t-Statistic Prob.

EXH -0.018321 0.006459 -2.836723 0.0087

LogLF 0.004327 0.002552 1.454397 0.1578

LogPTFA 0.002755 0.000892 3.088565 0.0311

LogCMD 0.151057 0.046045 3.280648 0.0290

RINTR -0.256035 0.049424 -5.180361 0.0000

LogGCF -0.032032 0.153684 -0.208428 0.8365

C 2.296100 4.271190 0.537579 0.5954

R-squared = 0.6911320; Adjusted R-squared= 0.615223;

F-statistic=8.423521; Prob. (F-statistic) = 0.000032

Selected Model: (2, 0, 0, 0, 0, 2, 1)

Source: Author's computation, 2022.

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111

With a coefficient value of 70.6%, the lag error correction term CointEq(-1), which

quantifies the adjustment rate to restore long-run equilibrium in the dynamic model,

has the anticipated negative sign. At a 1% significance level, it is statistically

significant. The high coefficient shows that the speed of adjustment to long-run

equilibrium is very high if there is a deviation in the short-run dynamic. This

supports the results of the bound test F-statistic that the long-run equilibrium

relationship between ∆GDP and its main determinants is attainable.

Table 5: The result of the Short-run and Long-run Coefficients of the ARDL
Short-run Coefficient

Variable Coefficient Std. Error t-Statistic Prob.

D(SML) 0.098861 0.118787 0.832257 0.4121

D(RINTR) 0.074750 0.027477 2.720457 0.0082

D(LogPTFA) 0.05286 0.012550 4.211952 0.0003

D(LogGCF) 0.911894 0.643310 1.417504 0.1670

D(LogGDP) 0.584271 0.234758 2.488820 0.0188

CointEq(-1) -0.895250 0.123931 -3.996182 0.0004

Cointeq = CMD - (0.1996*SMC -0.4890*RINTR + 0.0026*PTFA + 0.9119

*GCF + 2.4862*_GDP -16.1717 )

Long Run Coefficients

Variable Coefficient Std. Error t-Statistic Prob.

SML 0.199619 0.054898 3.636179 0.0005

RINTR 0.489037 0.256532 1.906336 0.0666

LogPTFA 0.02397 0.008749 2.739742 0.0063

LogGCF 1.453925 0.562713 2.583777 0.0151

Log∆GDP 2.486160 0.752409 3.304267 0.0025

C -16.171685 12.245780 -1.320592 0.1970

R-squared = 0.769667; Adjusted R-squared= 0.667150; F-statistic=6.532245

Prob. (F-statistic) = 0.000048

Selected Model: ARDL (1,0,1,0,1,1)

Source: Author's computation, 2022.

With a coefficient value of 89.5%, the lag error correction term CointEq(-1), which

quantifies the adjustment rate to restore long-run equilibrium in the dynamic model,

has the anticipated negative sign. At a 1% significance level, it is statistically

significant. The high coefficient shows that the speed of adjustment to long-run

equilibrium is very high if there is a deviation in the short-run dynamic. This

supports the bound test F-statistic results; the long-run equilibrium relationship

between capital market development and its main determinants is attainable.

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112

Residual Diagnostic Test

Serial correlation, heteroskedasticity and normality tests were conducted to ensure

that models are void of biased results. The errors of these models must be serially

independent. The parameter estimates will not be consistent because of the lagged

value of the dependent variable that appears as regressors in the model. When a

regression model includes the lagged value of the dependent variable as a regressor,

using the Durbin-Watson d test to detect serial correlation will be biased in such a

model. The result of the Breusch-Godfrey test from the two models shows that H0
cannot be rejected because the P-value of Obs*R-squared and F-Statistic in both

models is more than 0.05 significant level (See Table 1 from the Appendix).

Heteroskedasticity occurs when a model's error term's variance is not constant; it

varies as an independent variable. It causes the standard error estimates biased,

leading to unreliable hypothesis testing. There are numerous tests to detect

heteroskedasticity in the model, but the Breusch-Pagan-Godfrey test is used in this

study. From table 2 in the Appendix, the results show that all the criterion (F-

statistic and Obs* R-squared) agrees that the estimated ARDL model 1(2, 0, 0, 0,

0, 2, 1)and ARDL model 2 (1, 0, 1, 0, 1, 1) in this study are free from the problem

of heteroskedasticity because the P-value (0.0764 and 0.1054) of model 1 and P-

value(0.0903 and 0.1126)of model 2 is greater than 0.05 significant. Also, the

Jarque-Berra test shows that the error terms of the estimated ARDL model 1 (2, 0,

0, 0, 0, 2, 1) and ARDL model 2 (1, 0, 1, 0, 1, 1) are generally distributed because

their respective p-value of 0.080 and 0.43 is more than the 0.05 significance level.

Discussion of Findings

The result in Table 4 shows that ∆GDP is a negative function of the exchange rate

in the short-run and long-run under the period review and is statistically significant

at a 1% significance level. The negative coefficient of D(EXCH) and EXCH
implies that both the short and long-run rise (fall) in the exchange rate moves at a

faster rate (slower rate) than the growth rate of outputs in the economy. The result

reveals that at a 1% significance level, a 1% reduction in the exchange rate is

expected to raise economic growth by 0.018 in the long run. Changes in the labour

force were insignificant in the short and long run. This could be attributed to

Nigeria's continuous unemployment rate rise in the previous years. The pension

fund was both positively significant in the short and long run; it implies that the

increase in the pension fund scheme tends to increase economic growth.

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113

Economic growth is a positive function of Capital market development in both the

short and long run; a 1% increase in capital market development produces a 0.15%

increase in economic growth (∆GDP). Interest rates negatively influenced

economic growth in the short-run and long-run, respectively. A 1% increase in

interest rate produces a 0.25 increase in economic growth in the long run. Gross

capital formation was not significant both in the short-run and long-run. Table 5

shows that capital market development is a negative function of stock market

liquidity in the short-run and long-run under the period review. It is statistically

significant at a 1% significance level. The positive coefficient of D(SML) and SML
implies that both the short and long-run rise (fall) in the stock market liquidity

moves at a faster rate (slower rate) than the growth rate of capital market

development. The result reveals that at a 1% significance level, a 1% increase in

stock market liquidity is expected to raise capital market development by 0.199%

in the long run. A 1% increase in pension total fund assets produces a 0.024%

increase in capital market development. This result aligns with the findings of

Levine (1991).

Gross capital formation was not significant in the short-run but became substantial

in the long run; a 1% increase in gross capital formation promotes capital market

development by 1.45. Capital market development is a positive function of

economic growth in the short-run and long-run under the period review, and it is

statistically significant at 1%. A 1% increase in economic growth increases capital

market development by 2.5%.

5. Conclusion and Recommendations
The study concluded that CPS influenced capital market development and

economic growth based on the findings. The study further infers that an

improvement in CPS shall lead to an improvement in Nigeria's GDP and capital

market. Consequently, the study recommended that the National Pension

Commission partner with relevant stakeholders such as pension fund administrators

and custodians, making its investment regulations more flexible and encouraging

increased pension fund investments. Also, the government should implement a

mechanism to unify the contributory pension system across the federation states,

both the private and public sectors. Finally, periodical fund returns should be

transparent enough to build the utmost trust of contributors in the scheme.

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114

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