BY SAM OTUONYE
According to the performance report by the Pension Funds Operators Association of Nigeria (PenOp) for the year 2023, Pension Fund Administrators (PFAs) were in sync with PenCom’s regulation to invest in low-risk assets.
The report stated that Pension Fund Administrators (PFAs) in Nigeria favoured fixed income investments over other asset classes in 2023, with a preponderance of funds channelled towards investments in the said category.
The report revealed that investments by PFAs for the year under review tilted towards the low-risk fixed income assets with an average of 71.07% of investments by all PFAs allocated towards fixed incomes investments.
“This also aligns with Pencom’s regulation to invest in low-risk assets,” the report noted.
It further stated that investments in Money Markets Securities trailed well behind low-risk fixed income assets category with only 12.97% of investments in the asset.
This was followed closely by investments in equities receiving 11.04% of total investments while only 2.10% of funds were channelled towards alternative investments, which are financial assets that fall outside the conventional investments categories such as bonds, stocks etc.
Despite the dominant status of fixed income asset in 2023, however, a review of asset allocation by PFAs in 2019, 2021 and 2023 revealed a slight shift from fixed income asset towards equities and alternative investments on a rather marginal scale.
For instance, investment in equities as share of total investments rose from 7.64% in 2019 to 11.04% in 2023, while the share of fixed income investments dropped from 74.82% in 2019 to 71.07% in 2023.
In 2023, the total asset of Nigerian pension funds industry hit N18.36 trillion, representing a growth of 22.43% year-on-year.