Nigeria’s total pension assets increased by 17.5 percent to N16.76 trillion as of June 2023, compared with N14.27 trillion as of June 2022, owing to significant growth in remittances and assets such as mutual funds, corporation debts as well as FGN securities during the period.
“Nigeria economic growth remains subdued and fragile due to weak macroeconomic fundamentals including challenges associated with governments fiscal position, decline in foreign exchange reserves, inflationary and exchange pressures. The economic outlook for succeeding quarters of 2023 is cautious optimism as the new administration policy direction becomes clearer.
“Pension funds are expected to increase as the current higher yields on investment in fixed income securities would raise nominal returns. The equity market also provides opportunities for PFAs to take strategic positions in sound but undervalued stocks for long term benefit,” PENCOM said in March 2023.
Mutual funds component of the pension assets rose by three digits to N115.15 billion as of June this year, further demonstrating the growing appetite for this class of financial instrument. As of June 2022, mutual funds components of the pension assets were worth just N56.13 billion.
The second performing asset classes are the corporation debt securities, which grew by 58.5 percent to N1.89 trillion within the first six months of this year in contrast to N1.19 trillion by June 2022.
Not only did FGN securities account for the largest share of the pension assets as of June this year, these assets also grew by double digits as the analysis of the pension asset classes show that FGN securities rose on a year-on-year basis by 20.5 percent to N10.86 trillion as of June 2023 compared with N9.01 trillion a year ago.
However, the appetite for money market instruments waned. Whereas money market instruments were worth N2.15 trillion as of June 2022, when these asset classes accounted for 15 percent of the total pension assets, on a year-on-year basis, money market instruments within the pension assets declined by 26.6 percent to N1.58 trillion as of June 2023, thereby accounted for just 9 percent of the total pension assets.
In terms of management, the net asset value of the assets managed under the existing schemes rose by 12.2 percent to N1.61 trillion as of June 2023, up from N1.44 trillion a year ago. Assets managed by Closed Pension Fund Administrators (CPFAs) grew by 32.5 percent to N2.02 trillion as of June 2023, up from N1.52 trillion as of June 2022. Closed PFAs only manage pension remittances of their employees.
The next asset value of Fund I grew by 83.4 percent from N58.58 billion to N107.43 billion from June 2022 to June 2023.
From N6.24 trillion as of June 2022, assets under Fund II grew by 14.7 percent to N7.15 trillion as of June 2023. Fund III increased by 18.2 percent to N4.56 trillion by June this year, up from N3.86 trillion in the corresponding period of 2022.
Fund IV also grew by 12.5 percent to N1.26 trillion as of June this year as against N1.12 trillion as of June 2022. Fund V increased by 75.5 percent to N500.63 million in comparison to N285.31 million in a similar period in 2022.
Fund IV Active and Fund IV Retiree were not left out of the growth trend seen in other asset classes highlighted above. The former grew by 58.3 percent to N39.26 billion at half year 2023 as against N24.81 billion as of June 2023, while the latter rose by 44.4 percent to N4.86 billion by June this year in comparison to N3.36 billion a year ago.
Meanwhile, the contributory pension scheme is projected to witness even more remittances as more states of the federation join the scheme and remit their employees’ monthly remittances regularly and the non-interest scheme gets more patronage.
As of May 2023, PENCOM reported the following states as those regularly remitting their employees’ monthly contributions. The states are Edo, Lagos, FCT, Osun, Kaduna, Ekiti, Ondo and Delta.
