Pension Fund Administrators (PFAs) have channeled N13.6 trillion into government securities, marking a 16 percent year-on-year surge, according to the latest data from the National Pension Commission (PenCom) for October 2024.
The milestone reinforces the dominance of government securities in Nigeria’s pension industry, accounting for a significant portion of the total Assets Under Management (AuM).
The report revealed that the value of the total AuM increased by 3 percent month-on-month (m/m) and 22 percent y/y to N21.9 trillion as at end-Oct 2024. In terms of asset composition, the dynamics of the asset mix for pension AUM remained relatively unchanged, with the majority of pension holdings concentrated in government securities.
Within FGN securities, FGN bonds were dominant, making up 87 percent of this category. Their value increased by 5 percent y/y (approximately N510 billion) to N11.8 trillion.
The growth aligns with the high-interest rate environment driven by the Central Bank of Nigeria’s (CBN) contractionary monetary policies.
Furthermore, pension holdings in corporate debt grew by 20 percent y/y to N2.3 trillion. However, corporate debt issuance has been restrained due to elevated interest rates.
The value of pension AuM in domestic equities increased by 42 percent y/y and 3 percent m/m to N2.1 trillion, raising its share to 9.6 percent from 8.3 percent in October 2023.
Despite macroeconomic challenges, the Nigerian Exchange Limited (NGX) All-Share Index (ASI) delivered a robust 30.7 percent year-to-date return,outperforming Sub-Saharan peers like Egypt (+24.1 percent), Kenya (+21.7 percent), and South Africa (+11.6 percent).
The CBN’s recent monetary tightening, highlighted by the 27.50 per cent monetary policy rate (MPR) after six consecutive rate hikes this year, continues to influence investment behaviour.
Higher interest rates have supported bond investments but constrained corporate debt issuance.
However, the growth trajectory in pension AUM reflects resilience in the Nigerian pension system, supported by strategic asset allocation favouring government securities and equities amidst a challenging macroeconomic environment.
