Govt assets steal PFAs’ attention as pension fund top N19.53trn

• N1.2trn January rise significant 

• But FX investments by CPFAs key drivers 

Cynthia Ezekwe

The Nigerian pension industry has seen a significant increase in assets under management, reaching N19.5 trillion in January 2024, a significant rise from the N18.36 trillion recorded at the end of December 2023.

According to a recently released unaudited report by the National Pension Commission (PenCom), the growth in pension fund assets was driven by foreign exchange-dominated investments by Closed Pension Fund Administrators (CPFAs) and existing schemes. It was further noted that N12.14 trillion of the fund was invested in federal government securities, out of which N11.59 trillion was invested in bonds while N221.81 billion was invested in treasury bills. 

A more detailed breakdown of the report showed that the fund’s investments included N14.86 billion in agency bonds, N124.89 billion in sukuk bonds, and N181.57 billion in green bonds. In addition, N270 billion was invested in state government securities, and N1.71 trillion was invested in money market instruments. Additionally, the report indicated that the fund assets in United States Dollars were valued at N14.39 billion, at an exchange rate of N1,356 per US dollar. 

The commission’s report disclosed that as of November 2023, the total number of Retirement Savings Account (RSA) subscribers stood at 10.22 million. In addition, the report indicated that existing schemes had a net assets value of N2.02 trillion in November, which rose to N2.10 trillion in December, representing an increase of N82.54 billion. The following month, January 2024, saw the net assets value of existing schemes reach N2.21 trillion, an increase of N104.78 billion from the previous month. 

In addition to the growth of the existing schemes, the CPFAs also saw a significant increase in net assets value over the same period. In November 2023, the net assets value of the CPFAs was N1.79 trillion, rising to N1.94 trillion in December, representing a growth of N145.82 billion. The following month, January 2024, saw the CPFAs’ net assets value increase to N2.49 trillion, an increase of N552.15 billion from the previous month.

PenCom noted that pension schemes operating in the private sector prior to the introduction of the Contributory Pension Scheme in June 2004 were allowed to continue operating under the oversight of commission, subject to its guidelines. The CPFAs typically operate as defined benefit schemes, with the sponsor companies providing a guarantee to cover any funding deficit. This ensures that the pensioners are protected in the event that the fund is unable to meet its obligations.

To be eligible for a CPFA licence, companies must have operated a fully funded existing pension scheme with assets worth at least N500 million. In addition, they must demonstrate the capacity to manage pension fund assets and show that they have effectively managed their pension scheme for at least five years prior to the start of the CPS. These requirements ensure that only companies with the necessary experience and expertise are able to manage pension funds in Nigeria. 

According to PenCom’s unaudited financials, the massive growth is attributed to several factors, including new pension contributions received, interest earned on fixed income securities, and net realised gains on equities and mutual fund investments. PenCom spokesperson, Ibrahim Buwai, further explained that the growth was driven by a number of factors, including the increase in foreign exchange rates.

Oguche Agudah, chief executive officer of the Pension Fund Operators Association of Nigeria (PenOp), also highlighted the successful investments made by pension fund operators, which have resulted in healthy returns on investment. Agudah noted that the pension fund administrators would continue to explore new and viable investment options permitted under the law in order to further grow the assets and ensure that contributors receive good value for their investment.