Nigerian pension fund assets (PFAs) have increased to N22.3 trillion since the Contributory Pension Scheme (CPS) was implemented in 2004.
Despite the industry’s difficulties in 2024 due to high inflation and currency devaluation, Nigeria’s pension funds saw a 21.2 percent return from January to November of that year.
However, after accounting for inflation, this resulted in a real negative return that was double digits.
However, PFAs benefited greatly from several sources, particularly private stocks, Treasury bills, and international money markets.Â
Investments In Foreign Money Markets: 202%
Nigerian pension funds’ investments in foreign money market instruments increased by 202% between January and November 2024. By the end of October, these assets had increased from N48.9 billion at the start of the year to N147.8 billion.
Closed PFAs (CPFAs), which own over ₦134.3 billion in foreign money market assets, were the main force behind most product investments.
According to the National Pension Commission (PenCom), a CPFA is an employer who oversaw its pre-Pension Reform Act 2004 pension plan.
These CPFAs that invest in foreign securities include Nestle Nigeria Trust CPFA, Progress Trust CPFA, Shell Nigeria CPFA, and Total Energies EP CPFA.
Treasury Bills: 168%
The second-highest-yielding asset type for pension fund investments in 2024 was Treasury notes or T-bills. Treasury bills held by administrators of pension funds rose from N214.5 billion to N575.2 billion between January and November 2024.
The current schemes held Treasury bills of N170.6 billion, while Fund II schemes held N192.7 billion. Contributory funds for individuals under the age of 49 are known as Fund II pension funds. Closed PFAs decreased their treasury bill holdings from N18.8 billion at the beginning of the year to N8.6 billion by the end of November.
Cash And Other Assets: 146%
By the end of November 2024, PFAs had grown their cash holdings from N220 billion at the beginning of the year N541 billion. The largest holders of cash and other assets, with respective totals of N227.7 billion and N137.1 billion, were Fund II and existing schemes.
Private Stocks: 78%
During the review period, the private equity held by pension fund managers increased by 78%, from N71.7 billion to N127.8 billion. The need to counteract inflationary pressures and generate better long-term returns is probably what is driving this growth, which shows a strategic shift towards riskier but more lucrative assets. By the end of November 2024, the percentage allotted to private equity had increased from 0.39 percent at the beginning of the year to 0.57 percent. Nigerian pension regulations allow allocating no more than five percent of pension fund assets to private stocks.
Sukuk Bonds: 71%
By the end of November 2024, corporate bond returns had risen from N128.8 billion at the beginning of the year to N220 billion, a 70.8 percent gain.
