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 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.

The National Pension Commission (PenCom) announced that as of the end of the third quarter of 2023, the number of Retirement Savings Accounts (RSAs) under its Contributory Pension Scheme (CPS) has surged to 10 million.

What’s more, the pension assets under current management are now worth N16.76 trillion in today’s value.

During an interactive session held in Kano for the organized private sector, Dr. Umar Farouk Aminu, Commissioner of Administration at PenCom, delivered the news on behalf of Director General Aisha Dahir-Umar.

Aminu highlighted PenCom’s substantial strides in ensuring a seamless implementation of the CPS, emphasizing their focus on deploying the Enhanced Contributors Registration System (ECRS) within the pension industry.

Dahir-Umar acknowledged the rapid growth of Nigeria’s pension sector, underlining the introduction of the Data Recapture Exercise (DRE).

The DRE mandates all RSA holders who joined the CPS before July 1, 2019, to update their information with their respective Pension Fund Administrators (PFAs).

Furthermore, PenCom has successfully transferred contributions worth N10.20 billion to the RSAs of 142,486 NSITF Scheme contributors. They continue to prioritize the smooth transition of NSITF contributions into RSAs.

This milestone was celebrated at an interactive session in Lagos, where calls for collaboration among all stakeholders were reiterated.

The introduction of the RSA Transfer System (RTS) in 2020 was highlighted, showcasing its significant impact on improving service delivery by PFAs.

Adewale Smatt Oyerinde, the Director General of NECA, expressed optimism that these developments and deliberations would drive further advancements in Nigeria’s pension sector.

The achievements underscore the growing importance of prudent financial planning and management in the country.