Contributions received and positive investment performance has helped to push up total Pension Fund assets under management (AuM) to N15.58 trillion as at the end of the first quarter (Q1) 2023 from N14.99 trillion in Q4 2022 and N13.88 trillion in the corresponding quarter of 2022.
This is according to the latest pension funds industry portfolio report from the National Pension Commission (PenCom).
According to the quarterly industry statistics, the N15.58 trillion in total assets were primarily invested in Federal Government of Nigeria (FGN) securities which accounted for 63.14 percent of the total assets and is comprised of FGN Bonds: 92.36 percent; Treasury Bills: 5.28 percent and Agency Bonds, Sukuk and Green Bonds accounting for 2.36 percent.
Furthermore, the total value of investments in FGN securities rose by N552.79 billion (5.73 percent) to N10.20 trillion as at March 31, 2023 from N9.64 trillion as of December 31, 2022.
The increase in the value of investments in FGN securities, according to analysts from Cowry Assets Management Limited, was majorly due to additional investments in this asset class during the quarter.
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This indicates a 3.94 percent quarter-on-quarter (q/q) growth and a 12.25percent year-on-year (y/y) increase in total asset values respectively.
“The recorded growth was fairly stable relative to the growth of N568.33 billion recorded in Q4 2022 and was mainly due to contributions received and positive investment performance during the period.”
The value of investments in quoted ordinary shares (domestic and foreign) stood at N1.16 trillion (7.43 percent of total AuM), indicating a net increase of N141 billion (13.86 percent) compared to N1.02 trillion as at December 2022. The increase in the value of investments in domestic quoted equities was primarily due to the appreciation in the prices of some stocks during the reporting period.
“The Nigerian pension industry has opened several opportunities in recent years but has seen its growth stalled by challenges it is faced with amidst the expectations for the industry to continue its steady growth momentum in the coming years,” the analysts stated in a note to clients.
The growth in pension fund assets is a positive development for the Nigerian economy as it will help to boost investment and economic growth.
However, Cowry Research explains that there are several challenges that the pension industry faces at the moment, including the low level of awareness of the pension scheme among Nigerians as there are only about 10 percent of the Nigerian workforce covered by
the scheme; the low rate of compliance with the pension laws by employers; the high rate of withdrawals from the pension scheme by contributors and inadequate regulation which leaves the industry vulnerable to fraud and mismanagement.
“Overall, the Nigerian pension industry is in a strong position. The industry has seen strong growth in assets under management, the number of active contributors and the average monthly pension contribution.
“The industry’s net investment income has also grown strongly. However, the industry’s total expenses have also increased, which is putting pressure on the industry’s profitability. The government and the pension industry stakeholders need to work together to address these challenges to ensure the long-term sustainability of the pension scheme,” the firm further stated.
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