Pension

Assets Under Management Surge by 17.5% to N16.8 Trillion

Published

9 months ago

July 28, 2023

The regulated pension industry in Nigeria has seen remarkable growth, reporting a 17.5% year-on-year increase in assets under management (AUM) to reach an impressive N16.8 trillion in June 2023.

The latest monthly report released by Nigeria’s Pension Commission (PENCOM) reveals a 6.3% month-on-month surge in AUM, defying prevailing economic challenges and showcasing the industry’s resilience in navigating uncertainties.

Among the significant highlights of the report, Federal Government of Nigeria (FGN) debt securities remained dominant, constituting 64.8% of the total AUM in June 2023, slightly up from 64.2% in the same period last year.

A driving force behind the industry’s growth was the substantial increase in total FGN debt securities held by Pension Fund Administrators (PFAs), rising by an impressive 20% year-on-year and 3.8% month-on-month. Particularly, FGN bond instruments held by PFAs experienced a substantial 25.5% year-on-year surge, amounting to N10.4 trillion, accounting for 62.3% of the total AUM.

Experts attribute PFAs’ preference for FGN securities to their quest for risk-free assets with favorable yields, especially in light of the current elevated inflation rate, currently at 22.79% year-on-year.

Also, the Central Bank of Nigeria’s (CBN) successive rate hikes have contributed to relatively high fixed-income yields.

In the latest MPC meeting in July 2023, the CBN raised its policy rate by +25bps to 18.75%, marking the fourth consecutive rate hike this year.

The report also highlights the Debt Management Office’s (DMO) successful domestic borrowing efforts, raising N3.2 trillion from FGN bond auctions by H1 2023, achieving around 45% of its targeted domestic borrowing goal of N7.5 trillion. Domestic borrowing is expected to persist due to international capital market cost constraints and advanced economies’ contractionary monetary policies.

However, PENCOM’s report reveals a marginal -3% month-on-month decline in PFAs’ holdings of Nigerian Treasury Bills (NTBs) to N192.4 billion in June 2023. Despite this, the average NTB yield increased by +17bps month-on-month, representing only 1% of the total PENCOM AUM during the same month.

On the other hand, state government securities held by PFAs witnessed a remarkable 72.4% year-on-year growth, soaring to N277.4 billion in June 2023 compared to N160.9 billion in 2022.

Domestic equity holdings also demonstrated impressive growth, increasing by 29.9% year-on-year to N1.2 trillion, accounting for 7.5% of the total AUM in June 2023. The stock market’s positive gains following the recent forex liberalization policy contributed to this surge, with the NGX all-share index (NGX-ASI) gaining 9% month-on-month in June 2023.

In a separate report by PENCOM, cumulative pension contributions under the contributory pension scheme (CPS) witnessed a marginal 2.3% increase by the end of Q1 2023, totaling N8.7 trillion compared to N8.5 trillion in Q4 2022.

This growth is partly attributed to an increase in membership enrollment in the CPS, with pensions from the public and private sectors reaching N4.5 trillion and N4.2 trillion, respectively, in Q1 2023.

To expand the pension scheme to the informal economy, 3,898 individuals were registered under the Micro Pension Plan (MPP) in Q1 2023, bringing the total number of MPP beneficiaries to 93,225, compared to 89,327 in the previous quarter.

Despite political tensions and Naira scarcity affecting economic activities during the period, the pension industry’s gains can be partly attributed to sensitization and enlightenment workshops held across the country’s six geographical regions during the review period.

Experts emphasize the importance for PFAs to capitalize on this achievement by intensifying sensitization programs across all states, encouraging greater sign-ups from the informal economy to the Micro Pension Plan (MPP). This move is expected to bolster the industry’s growth and ensure financial security for future retirees.

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Samed Olukoya

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

1 month ago

March 19, 2024

Samed Olukoya

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.

Pension

Pension Fund Administrators Channel N130 Billion into Infrastructure Investments

Published

5 months ago

November 27, 2023

Investors King

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.

Pension

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

Published

6 months ago

November 6, 2023

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.