The Federal Government’s (FGN) Securities’ Net Asset Value (NAV) under the Pension Fund Administrators (PFAs) rose to 18.5%, reaching N14.1 trillion by the end of December 2024, up from N18.3 trillion in the preceding period of 2023.
According to the latest data released by the National Pension Commission (PenCom), FGN Securities accounted for 62.6% of the total pension fund assets in 2024. The total pension fund assets for the year amounted to N22.5 trillion, marking a 22.9% increase from N18.3 trillion recorded in 2023.
The surge in FGN Securities was attributed to an increase in supply by the Debt Management Office (DMO), which was aimed at meeting the Federal Government’s domestic funding targets and addressing the budget deficit in the N9.1 trillion 2024 budget. Pension Fund Administrators’ investments in FGN securities were also driven by the relatively stable and safe returns offered by these securities, especially in the prevailing yield environment.
In 2024, the average Monetary Policy Rate (MPR), the benchmark lending rate for the financial markets, stood at 25.5%, a significant rise from the 18.4% recorded in 2023.
The FGN Securities include Federal Government Bonds Hold Till Maturity (HTM), Federal Government Bonds Available for Sale (AFS), Treasury Bills, Agency Bonds, Sukuk Bonds (HTM), Sukuk Bonds (AFS), and Green Bonds. According to the report, FGN Bonds dominated the FGN securities, making up the largest asset class for pension funds, accounting for 93.6% of total FGN securities in 2024. FGN Bonds recorded N13.2 trillion in 2024, up from N11.5 trillion in 2023. Treasury Bills followed with N704 billion, an increase from N214 billion in 2023, while Sukuk Bonds ranked third with N93.6 billion, down from N245.6 billion in 2023.
New National Star investigation showed that the rising MPR by the Central Bank of Nigeria (CBN) allowed for greater investment in government securities, which offered attractive yields and risk-free returns.
It also noted that PFAs are benefiting from the weakening of the Naira and renewed investor confidence.
The pension industry operates under stringent regulations due to the nature of handling public funds, primarily workers’ contributions meant for retirement.
PenCom enforces guidelines and limits to ensure the safety and security of contributors’ funds, with restrictions on PFAs regarding the allocation of these funds into volatile assets.