Pension Fund Administrators (PFAs) have directed N12.14 trillion from pension fund assets into Federal Government of Nigeria (FGN) securities, encompassing bonds and Treasury Bills (TBs), as per sources.
Despite the relatively low interest rates of 19 percent offered by FGN bonds, which fall below the inflation rate, pension operators view FGN securities as a secure investment avenue amidst the lull in the bond market.
This investment represents approximately 60 percent of the N19.5 trillion pension assets as of January 2024, accumulating since the inception of the Contributory Pension Scheme (CPS) in 2004.
Of the N19.5 trillion, N12.14 trillion was invested in FGN securities, with bonds attracting N11.59 trillion, treasury bills N221.81 billion, agency bonds N14.86 billion, sukuk bonds N124.89 billion, and green bonds N181.57 billion.
Despite challenges such as delayed pension contributions from state and federal governments, investment income from FGN securities has been instrumental in the continuous growth of the pension fund, reaching N19.5 trillion.
Oguche Agudah, CEO of the Pension Fund Operators Association of Nigeria (PenOp), emphasized the safety and low-risk nature of FGN securities, aligning with the strict investment guidelines of the pension industry to ensure funds are available for contributors at retirement.
Coronation Asset Management experts noted that a significant portion of PFAs’ funds may be allocated to low-risk fixed income funds like FGN securities, particularly for individuals nearing retirement.
David Adonri, Vice Chairman of Highcap Securities, highlighted that PFAs prioritize public debt in their portfolio to maximize returns in the debt market.
The Central Bank of Nigeria’s adoption of Open Market Operation (OMO) and interest rate hikes up to June 2023 influenced the influx of funds from PFAs into Treasury Bills, contributing to the high investment in public debt.
Director-General of PenCom, Aisha Dahir-Umar, emphasized the significant impact of the CPS in Nigeria, highlighting the formation of long-term domestic capital represented by pension assets, which is gradually transforming the financial landscape and socio-economic development of the country.