Nigerian Pension Funds Cross N20tn Mark in May 2024
By Patience Ikpeme
The value of pension funds in Nigeria surged by 2.23% month-on-month, surpassing the N20 trillion mark to reach N20.23 trillion in May 2024.
This significant milestone was detailed in the unaudited report on the pension funds industry portfolio for the period ended May 31, 2024, released by the National Pension Commission (PenCom).
According to the report, Pension Funds Administrators (PFAs) have continued to show a strong preference for investment in federal government (FG) securities. As of the end of May, investments in these securities accounted for 63.22% of the total pension funds, amounting to N12.79 trillion, up from N12.40 trillion in April.
Experts attribute the PFAs’ sustained interest in government securities and money market instruments to the Central Bank of Nigeria’s (CBN) hawkish monetary policy. In an effort to curb market liquidity, the CBN has been raising benchmark interest rates, which has, in turn, made fixed-income securities more attractive to investors seeking higher returns.
Despite this, investment in the money market dipped marginally, with pension fund investment falling slightly to N1.93 trillion from N1.95 trillion in April. Conversely, corporate debt securities saw a decrease, with about 10.83% of the funds being allocated to this asset class, with corporate bonds receiving the largest share.
Interestingly, the appetite for mutual funds rebounded in May after a notable decline in April. In April, investments in mutual funds dropped by 19.93% month-on-month to N85.19 billion from N106.39 billion in March. However, May witnessed an upswing, with investments in mutual funds increasing to N95.28 billion.
The pension funds recorded a monthly increase of N440.40 billion in May, marking the second-highest monthly increase this year, following the N1.18 trillion surge in January. Over the first five months of the year, pension funds have appreciated by N1.87 trillion, and on a year-on-year basis, they have increased by N4.12 trillion.
The report also highlighted growth in the membership of the Retirement Savings Account (RSA). Between May 2023 and May 2024, the number of RSA members increased by 356,795, or 3.57%, bringing the total to 10,351,624.
The robust growth of Nigeria’s pension funds in May 2024 reflects the strategic investment choices made by PFAs in response to prevailing economic conditions. While the preference for government securities and money market instruments continues, the resurgence in mutual fund investments indicates a diversification trend aimed at optimizing returns for pension contributors.
