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Agusto & Co Forecasts the Nigerian Pension Assets to Hit ₦20 Trillion Mark by 2023

Published

3 years ago

on

pension funds - Investors King

The Nigerian Pension Industry (‘the Industry’) has evolved from one with predominantly public sector participants running a defined benefit scheme to a mandatory defined contribution system for all government and private sector employees. The 2004 pension reform redefined retirement planning in Nigeria and drove a significant growth in the number of enrolees and the size of managed assets in the Industry.

As at 31 December 2020, the Nigerian Pension Industry’s assets under management (AuM) stood at ₦12.3 trillion (or $32.3 billion[1]). This represented a 20.6% growth over the ₦10.2 trillion reported at the end of 2019 and an 18.3% compound annual growth rate over the last five years. According to Agusto & Co.’s newly released 2021 Pension Industry report, the growth in the Industry’s managed assets has been largely driven by investment returns and additional contributions, to a lesser extent. In particular, over the last five years, the Industry’s annual contributions have averaged ₦699 billion while withdrawals have averaged about ₦341 billion, translating to a net annual contribution of ₦347 billion and accounting for 26.6% of the Industry’s AuM growth over the period. The remaining 73.4% of average growth was attributable to investment returns earned on the portfolios.

The pension transfer window opened on 16 November 2020 to allow pension retirement saving account (RSA) holders switch Pension Fund Administrators (PFAs) once a year at most and at no cost. As at the end of the second quarter of 2021 (less than nine months after the transfer window was opened), over 25,600 RSA holders with pension assets over ₦102.5 billion were reported to have changed PFAs. We expect that in the subsequent quarters of 2021, the number of transfers will rise further as more enrolees become aware of the transfer process. In addition, we expect competition to intensify in the pension Industry as PFAs seek to attract new enrollees while retaining existing ones. Nonetheless, we expect the Industry’s structure to remain relatively unchanged in the short-to-medium term with the top five players leading on the back of good market presence and strong brand recognition.

Going forward, Agusto & Co. envisages continuous growth in pension assets supported by increased participation on the back of the country’s favourable demography of young adults and rising yields in money market instruments. In addition, we expect an improvement in the performance of the Industry as operators compete for higher return on investments, improved customer service and use of technology for operational efficiency. Therefore, Agusto & Co. projects that the Industry’s net assets will hit the ₦20 trillion mark by 2023, recording an average growth rate of 18% (in line with the five year average growth rate of 18%) in the next three years leading to 2023.

Some Highlights:

  1. PENSION ASSETS STOOD AT ₦12.3TRN AS AT THE END OF 2020
  2. THE INDUSTRY RECORDED AN 18.3% CAGR OVER THE LAST 5 YEARS
  3. AGUSTO & Co. PROJECTS THAT PENSION ASSETS WILL GROW BY AN AVERAGE OF 18% OVER THE NEXT 3 YEARS TO HIT THE ₦20 TRILLION MARK BY 2023
  4. OVER 25,600 RSA HOLDERS WITH PENSION ASSETS OVER ₦102.5 BILLION HAD CHANGED THEIR PFA AS AT THE END OF JUNE 2021.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Pension

Nigeria’s Pension Fund Value Plummets by 29% to $14.39bn Amid Naira Depreciation

Published

4 weeks ago

on

March 19, 2024

By

pension funds - Investors King

Nigeria’s pension fund value has declined by 29% to $14.39 billion in January 2024.

This drop attributed primarily to the ongoing depreciation of the naira against the dollar represents a contrast from the $20.41 billion recorded in December 2023.

The latest unaudited report on the pension funds industry portfolio revealed that the conversion rate of the naira to the dollar played a pivotal role in this decline.

In January, the naira was converted at a rate of N1,356.88/$, a significant deviation from the N899.39/$ rate observed in December.

This depreciation trend in the naira has been persistent since June 2023, following adjustments made by the Central Bank of Nigeria.

The continued weakening of the national currency in 2024 further exacerbated the erosion of the pension fund’s value when measured in dollar terms.

While the dollar value of the pension fund experienced a substantial downturn, in naira terms, the total assets under the Contributory Pension Scheme witnessed an increase to N19.53 trillion from N18.36 trillion at the end of 2023.

A significant portion of these assets, estimated at N12.14 trillion, was invested in Federal Government securities, reflecting a strategy to navigate the challenging economic landscape.

Amidst concerns over the impact of naira depreciation on pension funds, stakeholders have emphasized the need for prudent financial management and diversification of investment portfolios to mitigate risks associated with currency fluctuations.

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Pension Fund Administrators Channel N130 Billion into Infrastructure Investments

Published

5 months ago

on

November 27, 2023

By

pension fund

Pension Fund Administrators (PFAs) have strategically invested N130.18 billion from the Contributory Pension Scheme into infrastructure projects by the end of September 2023.

The data from the National Pension Commission reveals the commitment of PFAs to diversifying their investment portfolio while maintaining compliance with the Pension Reform Act of 2014.

As of the reporting period, the total assets under the Contributory Pension Scheme amounted to N17.35 trillion.

In addition to infrastructure investments, PFAs directed funds into various avenues, including domestic and foreign ordinary shares, federal and state governments’ securities, and money market instruments.

The investment strategy aligns with the amended investment regulation introduced by the commission.

The regulation outlines stringent requirements to ensure prudent and compliant investment practices in line with the provisions of the Pension Reform Act.

It emphasizes that pension fund custodians should adhere to written instructions from licensed PFAs regarding the investment and management of pension fund assets.

The regulation also sets guidelines for allowable investments outside Nigeria, and PFAs are cautioned against contracting out the custody of pension fund assets to third parties without prior approval.

This strategic approach not only upholds regulatory standards but also serves the long-term interests of contributors, ensuring a balanced and diversified investment portfolio.

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Federal Government Completes N1.02 Billion Payment to Power and Transport Pensioners

Published

5 months ago

on

November 6, 2023

By

pension funds - Investors King

The Federal Government announced the successful disbursement of N1.02 billion to 7,091 pensioners from the Power and Transport Sectors of the Parastatals Pension Department.

This vital step to fulfill pension obligations was revealed by Olugbenga Ajayi, the Head of the Corporate Communications Unit at the Pension Transitional Arrangement Directorate (PTAD), in a statement released on Sunday.

The allocated sum accounts for 39% of the accrued pension arrears owed to retirees in these sectors for the period spanning from August 2015 to September 2023.

The process involved a meticulous calculation of each pensioner’s monthly pension based on their career details, salary structure, and applicable pension increments.

This commendable initiative stemmed from the realization that 7,091 pensioners in the power and transport sector were receiving inadequate pension payments due to discrepancies within the inherited payroll system managed by PTAD.

Dr. Chioma Ejikeme, the Executive Secretary of PTAD, reiterated the government’s commitment to upholding fairness, equity, and justice, ensuring that every pensioner receives their rightful pension under the Defined Benefit Scheme.

Dr. Ejikeme also assured federal pensioners that the payment of accrued pension arrears would continue until all obligations are satisfied, subject to the availability of government funding.

This announcement underscores the government’s unwavering dedication to the welfare of retirees and is a significant milestone in addressing outstanding pension liabilities in the country.

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