Pension funds hit N22.25trn Fueled by Investment in Government Securities
By Patience Ikpeme
Nigeria’s pension fund industry continues its upward trajectory, with net asset value reaching a substantial N22.25 trillion by the end of November 2024. This represents a 1.5% increase from the N21.92 trillion recorded in October 2024, demonstrating consistent growth in the nation’s pension sector.
A recently released “Unaudited Report on Pension Funds Industry Portfolio for the Period Ended 30 November 2024,” reveals that a significant portion of these investments, 62.15% or N13.83 trillion, is strategically allocated to Federal Government Securities. This preference for government debt instruments highlights the perceived security and stability they offer within the context of potentially volatile market conditions.
A detailed analysis of these investments in Federal Government Securities shows a diverse portfolio, encompassing N11.95 trillion in Federal Government Bonds (HTM), N1.17 trillion in Federal Government Bonds (AFS), N575.16 billion in Treasury Bills, N10.63 billion in Agency Bonds (NMRC), N105.46 billion in Sukuk Bonds (HTM), N6.12 billion in Sukuk Bonds (AFS), and N2.9 billion in Green Bonds.
Beyond Federal Government Securities, pension fund operators have diversified their investments across a range of asset classes. Investments in State Government Securities reached N256.1 billion, demonstrating support for sub-national economic activity. The equity market also saw substantial participation, with N2.1 trillion invested in domestic ordinary shares and N297.5 billion in foreign ordinary shares, reflecting a strategy of seeking higher returns through diversification.
Corporate debt instruments attracted a total investment of N2.28 trillion, which included N1.41 trillion in Corporate Bonds (HTM), N848.14 billion in Corporate Bonds (AFS), and N28.48 billion in Corporate Infrastructure Bonds. Notably, the report indicates no investments in Corporate Green Bonds during this period, suggesting a potential area for future growth given the increasing global emphasis on sustainable finance.
Money market instruments also play a vital role in the portfolio, with N2.21 trillion invested. This allocation is spread across N1.89 trillion in fixed deposits/bank accounts, N174.61 billion in commercial papers, and N148 billion in foreign money market instruments.
Furthermore, the report highlights investments through mutual funds, totaling N83.03 billion. This includes allocations to open/close funds (N58.56 billion), REITs (N24.47 billion), supra-national bonds (N21 billion), infrastructure funds (N196.6 billion), real estate (N272.99 billion), and private equities (N127.83 billion).
Finally, the report notes that cash and other assets held by pension fund operators totaled N541.1 billion.
This comprehensive report offers valuable insights into the investment strategies employed by Nigeria’s pension fund operators, underscoring the significant role the pension industry plays in the nation’s financial ecosystem. The continued growth of pension fund assets and their strategic allocation across diverse asset classes are critical for securing the retirement income of Nigerians and driving broader economic development. Analysts will be monitoring future reports closely to observe how these allocations evolve, particularly in sectors like green bonds and other impact investments.
