The overall belongings beneath the Contributory Pension Scheme reached N18.36tn by the tip of 2023, based on information from the Nationwide Pension Fee.
PenCom’s ‘Unaudited report on pension funds business portfolio for the interval ended December 2023; Authorised Current Schemes, Closed Pension Fund Directors and RSA funds (together with unremitted contributions @CBN & Legacy Funds)’ confirmed that the nation’s pension funds appreciated by 22.43 per cent in 2023.
Throughout this era, the web asset was as much as N18.36tn from N14.99tn in 2022.
On a month-on-month foundation, pension funds grew by 2.39 per cent to N18.36tn in December, in comparison with N17.93tn within the earlier month.
In line with the report, N11.92tn of the belongings was invested in Federal Authorities securities representing 64.9 per cent of the whole belongings, and a 24 per cent year-on-year development in funding in FGN securities.
Company debt securities adopted at 10.4 per cent, with home extraordinary shares making up 8.6 per cent of the whole Belongings Beneath Administration.
Regardless of the rise, business watchers take into account the sector underpenetrated, as its complete AUM was equal to solely 9 per cent of Nigeria’s 2022 Gross Home Product, which was beneath the worldwide common of 29.4 per cent in 2020, based on World Financial institution information.
Additional evaluation of PenCom’s information confirmed the dominance of FGN securities, constituting the most important asset class for pension funds.
FGN bonds, particularly, make up 96 per cent of complete FGN securities and greater than 60 per cent of fund directors’ total asset combine.
The surge was attributed to elevated provide by the Debt Administration Workplace to satisfy the Federal Authorities’s home funding targets and tackle the funds deficit within the N23tn funds for 2023.
Throughout the 12 months, Pension Fund Directors invested within the FGN securities pushed by the comparatively secure and secure returns and the prevailing yield surroundings.
That was regardless of a 2.25 per cent improve within the financial coverage charges to 18.75 per cent by the Central Financial institution of Nigeria in 2023.
On the home entrance, investments in home equities skilled a 70 per cent year-on-year improve to N1.57tn.
The surge was linked to the strong efficiency of the Nigerian Trade in 2023, the place the All-Share Index reached an unprecedented 74,000 index factors—and closed the 12 months at over 45 per cent.
The market’s resilience was attributed to varied elements, together with strong company earnings, dividend declarations, government-led market reforms, and elevated curiosity from each home and overseas buyers.
Overseas transactions on the NGX elevated as of November 2023, indicating constructive investor sentiment, however the home investor section outperformed overseas buyers by roughly 52 per cent.
Whereas actual property and personal fairness noticed year-on-year development, they remained a small portion of the general portfolio.
Different various funding courses, equivalent to overseas extraordinary shares, infrastructure funds, mutual funds, and actual property, didn’t acquire important traction within the Nigerian market.
On fund sorts, the report indicated regular development in Retirement Financial savings Account funds, as extra Nigerians take part within the Contributory Pension Scheme.
Nonetheless, the Retiree Fund accounts for the most important share, representing 58.02 per cent of complete AUM, adopted by RSA Funds at 30.59 per cent, and Closed Pension Fund Directors at 1.39 per cent.
Analysts at Cowry Asset Administration Restricted of their weekly report projected that the pension business’s constructive development trajectory would play a pivotal position in Nigeria’s financial growth within the mid to long run.
“The robust efficiency of the equities market is anticipated to contribute considerably to the expansion of complete AUM. Moreover, expectations for the Central Financial institution of Nigeria to undertake a dovish stance in 2024 and past might result in a tapering of rates of interest, encouraging investments in authorities securities equivalent to bonds and different cash market devices. This will likely notably profit fund directors with longer funding horizons.
“We additionally anticipate extra engaging alternatives for elevated penetration into the pension fund area, thereby selling greater pension financial savings in Nigeria above the present stage,” the Cowry Asset report acknowledged.
The PUNCH had earlier reported that the worth of pension funds declined by 45.18 per cent when valued in {dollars}, following the devaluation of the naira.
Information obtained from the Nationwide Pension Fee’s web site confirmed that the web asset worth of pension funds stood at N17.35tn as of September, amounting to $19.83bn when dollarised, utilizing the official change charge of 874.71/$ on November 10.
In a chat with The PUNCH, the Head of the Company Communications Division, PenCom, Abdulqadir Dahiru, mentioned that the devaluation of Nigeria affected not solely pension funds however your complete financial system.
Talking on what the fee was doing to hedge towards the microeconomic headwinds, he mentioned, “Naira devaluation didn’t simply have an effect on pension funds; it affected all people, and it’s a twin factor. You’ve gotten inflation and you’ve got devaluation.
“So, anyone who has cash within the financial institution can inform you what inflation has finished to his cash. It reduces the worth of the foreign money as a result of then you definately want extra of that foreign money to purchase the identical quantity of the products and providers.”