Pension fund rises 11.6% in H1 2024

National Pension Commission (PenCom) has said pension fund assets climbed by 11.5990 per cent to N20.484 trillion at the end of first half of financial year 2024 from N18.355 trillion in Dec, 2023.

Over 12 months period, Pension assets has grown by 22.21 per cent year on year from N16.761 trillion in the first half of 2023 to N20.484 trillion in June 2024, according to figure obtained from the Pencom.

Breaking down the AUM by asset class and fund type as at June 2024, the report highlights that a significant portion, 63.3 per cent, was invested in Federal Government of Nigeria (FGN) securities.

On the similar track, investment in corporate debt securities followed at 10.8 per cent, with domestic ordinary shares making up 9.6 per cent and money market instruments eating 9.3 per cent of the total AUM.

In an emailed note, Cowry Asset Limited said despite this growth, the industry is deemed underpenetrated, with its total AUM equivalent to only 8.9 per cent of Nigeria’s 2023 gross domestic product (GDP).

This is a notable disparity when compared to the global average of 29.4 per cent in 2020, according to World Bank data cited by the investment banking firm.

FGN bonds, in particular, makes up to 96 per cent of total fund parked into FGN securities and more than 60 per cent of fund administrators’ overall asset mix in the period.

The report reveals that investment in FGN securities reached N12.96 trillion in June 2024, marking a substantial 19.4 per cent year-on-year growth from the N10.86 trillion in June 2023.

Demand for bond was propelled by rising yields and high interest rates environment as well as the increased supply of FGN papers by the Debt Management Office (DMO) to meet the federal government’s domestic funding targets amounting to N6.12 trillion 2024 budget.

MarketForces Africa reported that Debt Management Office has met 70 per cent of its targeted local borrowings from FGN bonds sales year to date – N4.3 trillion has been raised.

In its market update, the investment firm said despite a 750 basis points increase in the monetary policy rates to 26.25 per cent in May 2024, pension fund administrators (PFAs) continued to invest in FGN securities.

Analysts noted that pension asset managers’ appetite was driven by the relatively safe and stable returns and the prevailing attractive yield environment.

The report also highlights the high growth in pension fund investments in domestic ordinary shares, experiencing a 55 per cent year-on-year increase to N1.91 trillion.