The assets under the Contributory Pension Scheme (CPS) in Nigeria surged by 22.43%, reaching a total of N18.36 trillion by the end of 2023, as reported by the National Pension Commission (PenCom). The growth was revealed in PenCom’s ‘Unaudited report on pension funds industry portfolio for the period ended December 2023,’ indicating a steady increase in pension funds throughout the year.
The report highlighted that the net asset value of pension funds rose from N14.99 trillion in 2022 to N18.36 trillion in 2023, representing a remarkable year-on-year growth. On a monthly basis, pension funds expanded by 2.39%, reaching N18.36 trillion in December compared to N17.93 trillion in the previous month.
Federal Government securities accounted for the majority of the assets, with N11.92 trillion invested, making up 64.9% of the total assets. Corporate debt securities followed at 10.4%, and domestic ordinary shares constituted 8.6% of the total Assets Under Management (AUM).
Despite the positive growth, industry observers noted that the pension sector remains underpenetrated, with total AUM equivalent to only 9% of Nigeria’s 2022 Gross Domestic Product (GDP), falling below the global average of 29.4% in 2020, according to World Bank data.
Analysis of PenCom’s data revealed the dominance of Federal Government securities in pension fund portfolios, particularly FGN bonds, constituting 96% of total FGN securities and over 60% of fund administrators’ overall asset mix.
The surge in assets was attributed to increased supply by the Debt Management Office to meet the Federal Government’s domestic funding targets and address the budget deficit in the N23 trillion budget for 2023.
Despite a 2.25% increase in the monetary policy rates to 18.75% by the Central Bank of Nigeria in 2023, Pension Fund Administrators favored investments in FGN securities due to their relatively safe and stable returns.
On the domestic equities front, investments experienced a substantial 70% year-on-year increase to N1.57 trillion, driven by the robust performance of the Nigerian Exchange in 2023.
Cowry Asset Management Limited analysts project that the positive growth trajectory of the pension industry will play a pivotal role in Nigeria’s economic development in the mid to longer term. They anticipate more attractive opportunities for increased penetration into the pension fund space, promoting higher pension savings in Nigeria above the current level.
