Pension fund managers have made substantial investments in Nigerian stocks, totaling N550 billion in the first quarter of 2024, pushing their total exposure to the equities market to a record N2.32 trillion as of March.
According to data from the National Pension Commission (PenCom), there has been a 31% increase in equity investments, rising from N1.77 trillion in December 2023 to N2.32 trillion by March 2024. Equities now constitute 11.79% of the Pension Fund Administrators’ (PFAs) total portfolio, up from 8.97% in December 2023.
The total assets under management (AUM) of all PFAs also saw growth, reaching N19.67 trillion by March 2024 compared to N18.36 trillion in December 2023.
Analysts at the Pension Fund Operators Association of Nigeria (PenOp) view this trend as a sign of growing confidence in the equity market among pension funds. The N550 billion investment contributed to the stock market’s year-to-date return of 39.84% in the first quarter of 2024, making it the second-best return in Africa.
Despite aggressive rate hikes by the Central Bank of Nigeria (CBN), which raised the benchmark interest rate by a combined 600 basis points to 24.75% this year, the stock market thrived. The pension funds played a significant role in driving the stock rally, offsetting the negative impact of higher interest rates on companies.
Oguche Agudah, CEO of PenOp, attributed the growth in pension assets to various factors, including investments in domestic and foreign ordinary shares, government debt securities, corporate debt, and cash. Notably, the value of ordinary shares held by pension funds surged by over N360 billion between December and January, driven by a bull run in the NGX.
Foreign ordinary shares also contributed to the surge, with the devaluation of the naira leading to the revaluation of foreign assets upwards. Additionally, fixed-income securities, particularly federal government and corporate debt securities, witnessed significant value growth, fueled by high yields on government securities amid efforts to combat inflation.
The positive performance of listed equities and fixed-income securities has led to a resurgence in pension funds’ interest in equities, marking a shift from previous years.
This trend aligns with global pension asset growth, which saw a return to growth in 2023, reaching $55.7 trillion, driven by stronger capital market performance worldwide.
