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).
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 per cent 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 per cent 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 per cent of the total assets, and a 24 per cent year-on-year growth in investment in FGN securities.
Corporate debt securities followed at 10.4 per cent, with domestic ordinary shares making up 8.6 per cent of the total Assets Under Management.
Despite the increase, industry watchers consider the sector underpenetrated, as its total AUM was equal to only nine per cent of Nigeria’s 2022 Gross Domestic Product, which was beneath the global average of 29.4 per cent in 2020, according to World Bank data.
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 per cent of total FGN securities and more than 60 per cent 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 per cent increase in the monetary policy rates to 18.75 per cent by the Central Bank of Nigeria in 2023.