The assets of Pension Fund Administrators increased in the stock market and bond market over the last 10 months to ₦12.4 trillion at the end of October 2023.
The management of the National Pension Commission (PenCom) must be doing something right for its investments to keep growing as it has done.
Or is it just the pool of funds coming in monthly?
In November, Pencom revealed that the Net Asset Value (NAV) of the domestic and foreign stock rose by 59.6% to ₦1.54 trillion as of the end of September 2023, 9M’23.
Again, PenCom has revealed that its NAV in the Nigerian stock market and FGN Bonds Held-to-Maturity (HTM) rose to ₦12.4 trillion as of the end of October 2023.
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The rise shows an increase of ₦2.27 trillion when compared to ₦10.13 trillion recorded at the beginning of the year.
Pension Fund Administrators (PFAs) operating in Nigeria have raised the value of their assets in the stock market and the Bond market by 58% and 18.95% in the last 10 months, respectively.
Significant Growth
It would seem like the stock market’s bullish run has renewed the interest of investors amid cheap stocks, and lucrative yield on long-term FGN bonds.
Following PFA exposure in the stock market, the NGX All-Share Index gained 35.09% in 10 months (currently at 41.24% Year-till-Date (YtD) growth as of December 15, 2023).
The Pension industry has been recording significant growth in recent years, following several regulatory reforms by PenCom, which has seen the number of PFAs in the industry reduce as a result of some mergers and acquisitions.
PenCom in its latest report disclosed that the industry’s total assets gained a whopping ₦2.67 trillion in 10 months to stand at ₦17.66 trillion as of October 2023.
This figure represents a 17.8% increase when compared to ₦14.99 trillion as of the end of December last year.
As of October 2023, total FGN securities that include: FGN bonds (HTM), Treasury Bills, Agency Bills, Sukuk bonds, and Green bonds increased to N11.42 trillion, contributing 64.7% to overall PFAs total assets.
On the other hand, PFA’s exposure in the stock market accounted for 8.1% of the total assets, indicating that the bulk of the industry’s exposure is still towards less risky asset classes.
The pension Industry operates under stringent regulations due to the nature of handling public funds, primarily the contributions of workers meant for their retirement.
Contributors’ Protection
The PenCom enforces guidelines and limits to ensure the safety and security of contributors’ funds as restrictions are placed on PFAs regarding allocating contributors’ funds into volatile assets.
This cautious approach is in line with the need to protect contributors’ savings and ensure they have a secure and reliable source of income during their retirement years.
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To achieve this, the PFAs adopt a mix of fixed and variable assets in their investment portfolios.
This diversified approach takes into consideration the risk tolerance of contributors and the different fund categories within the pension system.
The surge in PFA assets in the Nigerian stock market is in tandem with the broader growth of the pension industry.
Also, it suggests a positive outlook for both pension fund managers and the Nigerian stock market.
