The Federal Government, FGN Securities’ Net Asset Value, NAV, under the Pension Fund Administrators, PFAs’, investment rose significantly by 18.5% to N14.1 trillion at the end of December 2024 from N18.3 trillion in the corresponding period of 2023.
Breakdown of the latest data released by the National Pension Commission, PenCom, shows that the FGN Securities accounted for 62.6% of the total pension fund assets.
The total pension fund assets for the year 2024 stood at N22.5 trillion indicating a 22.9% increase from N18.3 trillion recorded in 2023.
The surge in Federal Government Securities was attributed to increased supply by the Debt Management Office, DMO, to meet the Federal Government’s domestic funding targets and address the budget deficit in the N9.1 trillion budget for 2024.
During the year, PFAs investments in the FGN securities were driven by the relatively safe and stable returns and the prevailing yield environment.
The average rate of the Monetary Policy Rates, MPR, which is the benchmark lending rate for the financial markets, in 2024 stood at 25.5% from 18.4% recorded in 2023.
The FGN Securities include: Federal Government Bonds’ Hold Till Maturity, HTM; Federal Government Bonds’ Available for Sale, AFS; Treasury Bills, Agency Bonds; SUKUK Bonds (HTM); SUKUK Bonds (AFS); and Green Bonds.
According to the report, FGN Bonds showed dominance of FGN securities, constituting the largest asset class for pension funds, accounting for 93.6% of total FGN securities in 2024. It recorded N13.2 trillion in 2024 against N11.5 trillion recorded in 2023. Treasury Bills followed in the chart recording N704 billion against N214 billion in 2023.
SUKUK Bonds occupied the third position posting N93.6 billion from N245.6 billion recorded in 2023.
Commenting on this development, Investment Banker & Stockbroker, Mr. Tajudeen Olayinka, said: “The increasing MPR by the Central Bank of Nigeria (CBN) created room for divestment to Government securities amid attractive yield and risk-free investment.
“The apex banking regulating body had consistently hiked the yield on Government securities in 2024 amid the rising inflation rate and supported the government in funding its budget deficit”.
Speaking as well, Ambrose Omordion, analyst at InvestData Consulting said, “PFAs are benefiting from the weakening of the Naira and renewed investors’ confidence .The pension industry operates under stringent regulations due to the nature of handling public funds, primarily the contributions of workers meant for their retirement.
“The PenCom enforces guidelines and limits to ensure the safety and security of contributors’ funds as restrictions are placed on PFAs regarding the allocation of contributors’ funds into volatile assets”.
