Nigeria’s Pension Fund Records First Decline in 18 Months

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In a significant shift, Nigeria’s pension fund has experienced its first decline in 18 months, attributed primarily to portfolio adjustments made by Pension Fund Administrators (PFAs).

According to monthly data released by the National Pension Commission, the pension fund contracted by 0.47 percent, dwindling to N19.669 trillion in March from N19.759 trillion in the previous month. This marks a departure from the prolonged growth trajectory the fund had enjoyed.

The last time such a decline was observed was in September 2022 when the fund dipped marginally by 0.01 percent.

Ambrose Omorodion, the Chief Operating Officer of Investdata Consulting Limited, identified the portfolio rebalancing activities of PFAs as the driving force behind the recent downturn. He attributed this rebalancing to adjustments prompted by shifts in the interest rate environment between February and March.

The Central Bank of Nigeria’s decision to raise the Monetary Policy Rate to 24.75 percent from 22.75 percent in March, following a previous increase in February, underscores the tightening stance aimed at addressing persisting inflation, which had surged to 33.2 percent in March, according to the National Bureau of Statistics.

Omorodion noted, “The observed decline in the pension fund can be attributed to the portfolio rebalancing of PFAs. However, we anticipate stabilization in the future.”

In a contrasting development, data from PenCom indicated a modest uptick in the appetite for equities, which saw a 5.94 percent increase to N2.32 trillion in March from N2.19 trillion in the preceding month. Analysts at the Pension Fund Operators Association of Nigeria interpreted this rise as a sign of growing confidence in the equity market among pension fund stakeholders.

PenOp further revealed that in the first quarter of 2024, there was a notable surge in its involvement, with a 1.7 percent rise in investments in Federal Government of Nigeria (FGN) securities from N11.92 trillion to N12.20 trillion. During the same period, cash and other assets experienced a modest uptick of 0.9 percent, while corporate debt securities rose from N1.91 trillion to N2.07 trillion, indicating an increasing interest in corporate debt instruments among pension funds.

In response to the need for enhanced stakeholder understanding, PenOp unveiled an enlightenment program aimed at educating various stakeholders about the operations and activities of the pension industry. According to PenOp’s Chief Executive Officer, Mr. Oguche Agudah, the initiative will feature interactive interviews and conversations covering a range of pension industry products and services, aimed at simplifying complex concepts and enhancing stakeholders’ appreciation of the pension sector.

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