PFAs Investment in FGN Bonds Rises to N9trn
Aisha Dahir-Umar, Director General, National Pension Commission

PFAs Investment in FGN Bonds Rises to N9trn

As pension assets rose to about N14.60 trillion, according to the latest report from National Pension Commission (Pencom), fund managers’ investment has also spiked to about N9 trillion in October 2022.

According to Pencom, the total Pension Industry assets under management increased by 8.72 per cent to N14.59 trillion in October 2022 from N14.42 trillion in the previous month.

Total pension assets have been estimated to reach N14.8 trillion in 2022. In 2021, Nigeria’s pension asset had settled at N13.42 trillion amidst improve compliance driven by increased retirement savings accounts. The recent surge, according to analysts was driven by the opportunity avail to RSAs holders to use their holdings to support mortgage deals

“This tremendous growth can be attributed to the increase in the level of compliance by the public and private sector employers as a result of the various steps taken by the Commission to improve compliance and coverage as well as enhanced market penetration and strategies deployed by the PFAs”, Cowry Asset analysts said.

“Statistics show that the industry has grown by more than 600 per cent in terms of pension fund assets size, a clear indication of the industry’s growth and evolution as well as the continued acceptance of the scheme by workers in both the formal and informal sector”.

In 2022, the rise in total industry assets was principally driven by the continued rising exposure of fund managers to securities of the federal government in the face of interest rate hikes by the central bank plus the attractive money market instruments amid rising fixed income yields, according to Cowry Asset Management.

With a positive rise in the number of contributors to 9.85 million members at the end of October, the total number of contributions is expected to surpass the 10 million membership mark by the close of the year.

Analysts noted that the funds have continued to favour the Nigerian government’s debt securities as an asset class resulting from the scantiness of good quality investible securities available to them.

From the report from PenCom, analysts spotted that PFA’s investment into FGN Securities has remained the principal driver of the monthly gains as it holds over 60 per cent in FGN Bonds worth N8.84 trillion at the end of October.

Also, money market instrument accounts for almost 15 per cent of PFA holdings while corporate debt securities accounted for 10.5 per cent of the total industry holdings in various asset classes. READ: PFAs Increase Position in FGN Bonds as Pension Asset Spikes

PFA holdings in domestic shares from the local equities market dwindled further to merely 5.6 per cent which was principally attributed to the lack of depth of the equities market which recorded the worst decline so far this year in the month of October.

Cowry Asset stated that a significant factor hindering wider acceptance and rapid growth of the industry has been the unavailability of investible options just as fund managers were prohibited from owing foreign securities through sourcing FX on their own.

In their view, analysts said they expect to see a positive rise in total assets under management to nearly N14.8 trillion by the end of the year. # PFAs Investment in FGN Bonds Rises to N9trn

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