Contributory Pension Funds Rise by 22 Percent

The total assets under the Contributory Pension Scheme reached N18.36tn by the end of 2023, according to data from the National Pension Commission.

PenCom’s ‘Unaudited report on pension funds industry portfolio for the period ended December 2023; Approved Existing Schemes, Closed Pension Fund Administrators and RSA funds (including unremitted contributions @CBN & Legacy Funds)’ showed that the country’s pension funds appreciated by 22.43 percent in 2023.

During this period, the net asset was up to N18.36tn from N14.99tn in 2022.

On a month-on-month basis, pension funds grew by 2.39 percent to N18.36tn in December, compared to N17.93tn in the previous month.

According to the report, N11.92tn of the assets was invested in Federal Government securities representing 64.9 percent of the total assets, and a 24 percent year-on-year growth in investment in FGN securities.

Corporate debt securities followed at 10.4 percent, with domestic ordinary shares making up 8.6 percent of the total Assets Under Management.

However, industry watchers consider the sector underpenetrated, as its total AUM was equal to only nine percent of Nigeria’s 2022 Gross Domestic Product, which was beneath the global average of 29.4 percent in 2020, according to World Bank data.

Largest Asset Class

Further analysis of PenCom’s data showed the dominance of FGN securities constituting the largest asset class for pension funds.

FGN bonds, in particular, make up 96 percent of total FGN securities and more than 60 percent of fund administrators’ overall asset mix.

The surge was attributed to increased supply by the Debt Management Office to meet the Federal Government’s domestic funding targets and address the budget deficit in the N23tn budget for 2023.

During the year, Pension Fund Administrators invested in the FGN securities driven by the relatively safe and stable returns and the prevailing yield environment.

That was despite a 2.25 percent increase in the monetary policy rates to 18.75 percent by the Central Bank of Nigeria in 2023.

On the domestic front, investments in domestic equities experienced a 70 percent year-on-year increase to N1.57tn.

The surge was linked to the robust performance of the Nigerian Exchange in 2023, where the All-Share Index reached an unprecedented 74,000 index points—and closed the year at over 45 percent.

Punch/Hauwa Abu