Corporate bonds

PFAs increase investment in corporate bonds as total funds reach N13.76 trillion

Nigeria’s total pension fund assets reached unprecedented levels, rising by N156.2 billion to a record high of N13.76 trillion in February 2022, from N13.61 billion recorded the month previous.

This is according to the unaudited report on the portfolio of the pension fund industry for the month of February 2022.

According to the report, pension plan administrators increased their exposure to corporate debt securities during the month under review, particularly to corporate bonds. Notably, investment in corporate debt securities increased by 7.35 billion naira in February 2022 to 1 trillion naira.

Along the same lines, RSA registrations increased by 37,225 in the reporting month, to 9.59 million at the end of February 2022.

Breakdown

  • The RSA II fund accounted for the bulk of the contribution to the fund with N6.01 trillion, or 43.7% of total pension funds.
  • RSA Fund III followed with 3.7 trillion naira, representing 26.6% of total assets. Additionally, Fund Category III increased by N53.36 billion during the review month.
  • Existing schemes accounted for 10.3% of total funds, increasing by 14.79 billion naira to 1.42 trillion naira.
  • In addition, CPFAs accounted for 11.1% of total funds, amounting to N1.53 trillion during the reporting period.

In terms of real estate investment, PFA investment in real estate fell by N1.78 billion in February 2022 to stand at N156.1 billion from N57.84 billion recorded in January 2022 .

Local equity investment jumps N16.96 billion

  • Pension fund administrators during the reporting period increased their investments in the local equity market, with more than 16.96 billion naira of new investments in the stock exchange, bringing its total investments in the local market to N977.39 billion.
  • Improved interest in the local equity market by PFAs follows positive market performance, with the All-Share Index gaining 2.57% in February 2022 to close at 47,394.53 points.
  • Similarly, the NGX Pension Plan Index rose 2.86% in the reporting month, outperforming the market benchmark.
  • On the other hand, PFAs reduced their exposure to the foreign equity market for the second month in a row, as their investments fell by 514.75 million naira to 109.97 billion naira.

Pension trustees have tried to improve their returns by diversifying their investment portfolios ensuring they give value to their many contributors, especially with the transfer window still in play which allows contributors to switch PFAs if they are not satisfied with their services.

Recall that Nairametrics ranked the best performing PFA for 2021, which revealed that the industry recorded an average return on investment of 6.42% during the year, with Stanbic IBTC, Veritas Glanvills Pensionsand Sigma Pensionsprinting average yields of 9.7%, 8.73% and 8.67% respectively.

why it matters

The Nigerian pensions industry continues to grow in value and adoption, although very small compared to other economies. The total number of retired contributors, at 9.56 million, represents only a pension penetration rate of 14%, compared to more than 19% in South Africa and 77% in the United Kingdom.