Emmanuel Ojukwu
Pension Fund Administrators (PFAs) have significantly reduced their investments in mutual funds, opting instead for Federal Government securities and money market instruments. This shift was revealed in the Unaudited Report on Pension Funds Industry Portfolio for April 2024, recently released by the National Pension Commission.
According to the report, mutual funds experienced a substantial decline of 19.93 per cent month-on-month, dropping to N85.19bn from N106.39bn in the previous month. In contrast, investments in Federal Government securities—which include bonds, treasury bills, and sukuk bonds—increased by 1.61 per cent, rising to N12.40tn from N12.20tn.
Similarly, inflows to money market instruments, including fixed deposits, commercial papers, and foreign money market instruments, surged by 9.70 per cent, closing the month at N1.95tn.
However, interest in the equities market saw a downturn, with investments in domestic ordinary shares decreasing by 12.47 per cent to N1.82tn from N2.08tn in the previous month. This is a notable shift from the first quarter of the year, when PFAs had boosted their equities market investments by 11.79 per cent, reaching N2.32tn in March 2024 from N1.77tn in December 2023.
Analysts at the Pension Fund Operators Association of Nigeria interpret this trend as reflecting a cautious confidence among pension fund operators towards the equities market. Despite this, interest in foreign shares grew by 4.08 per cent in April, with operators investing approximately N2.07tn in foreign equities.
Overall, the value of Nigeria’s pension funds increased to N19.79tn during the review period, recovering from a 0.47 per cent decline recorded in March. Membership in the Retirement Savings Account also grew by 0.33 per cent month-on-month, reaching 10,315,034 from 10,280,956 in March.
In dollar terms, pension funds stood at $14.88bn at the exchange rate of N1,329.71/$ as of the end of April, up from $14.79bn in March when the rate was N1,544.08/$.
The slight dip in March marked the first decline in 18 months, attributed by analysts to portfolio rebalancing by pension fund operators.
Amid these shifts, the Chartered Institute of Stockbrokers has called for increased participation of PFAs in the equity market. During a courtesy visit to the Governor of the Central Bank of Nigeria, Olayemi Cardoso, the immediate past President and Chairman of the CIS Council, Mr Oluwole Adeosun, stressed the importance of pension funds in driving sustainable liquidity for the local equity market.
“Pension funds are globally the foundational base that drives sustainable liquidity for the local equity market. While the Pension Act permits pension fund administrators to invest up to 25 per cent of their assets in the equity market, we have observed that only about 10 per cent of the funds are currently invested in equities,” Adeosun noted. “Given the critical role of pension fund investment in galvanising liquidity in the domestic equity market, PFAs should be investing a substantially higher proportion of their funds in equities. We, therefore, seek the support of the CBN to engage with PENCOM in this regard.
