Nigeria’s pension fund industry continues to grow both in asset value
and in pension participants. Analysis conducted by Quantitative
Financial Analytics indicates that contributors have injected N2.8
trillion into the industry, although withdrawals stood at N1.64
trillion.
For the first 8 months of 2020, the pension asset value has increased
by 11.06%, from the N10.218 trillion the industry ended 2019 with to
the N11.347 trillion it reported in August 2020.
This growth rate is commendable when compared with a similar period
in 2019. During the first 8 months of 2019, the industry grew its asset
value by 9.29%. Contrary to expectations that the financial impact of
COVID-19 would lead to larger withdrawal from pension funds, 2020
withdrawals, though larger than the corresponding 2019 numbers, are not
large enough to highlight the impact of COVID-19.
Interestingly, 2020 contributions surpassed that of 2019 by slightly
over a trillion Naira. This is an indication that more Nigerians are
coming in grip with the importance of retirement savings.
What you should know
The asset classes that gathered more allocation are FGN Bonds, Bank
Placements, Corporate debt securities, and Domestic ordinary securities.
On the other hand, the asset classes that suffered more by way of
withdrawals are Treasury bills, FGN Bond, and Domestics Equity
Securities.
- FGN Bonds remain the asset class with the largest allocation of pension fund assets, with an allocation of N6.39 trillion.
- Bank placements have N1.64 trillion.
- Treasury Bills came third with an allocation of N1.005 trillion.
- It means then that about N9 trillion out of the N11 trillion in
pension fund assets is invested in FGN Bonds, Bank placements, and
Treasury bills.
Bottomline
While the above discovery underscores the extent of diversification
in the industry, it goes to also show how risk-averse Nigerian pension
fund managers are. With low-interest rates from those asset types, one
wonders how many of the pension fund managers are generating the large
performance returns being reflected in the daily prices that get
published on their websites.
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