Nigeria’s Mutual Fund Hits N1.41trn In 2022

The total asset value of mutual funds in Nigeria grew to N1.411 trillion for the year ended 2022 as average Nigerian investors are diversifying their assets in a more secured option while sustaining improved income stream.

Data released by the Security and Exchange Commission (SEC) as at December 30, 2022 showed that net asset value of mutual funds stood at N1.411 trillion as against N1.314 trillion achieved in December 31, 2021, showing a gain of N97 billion.

A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.

Meanwhile, the investors on the Nigerian equities market for 2022 enjoyed a return of 19.98 per cent on their investment, despite the year being a pre-election year as the impact of electioneering activities on the equities market was less pronounced when compared to previous pre-election years. Also, mutual funds are one of the few available investment funds with positive yields in Nigeria.

Review of the Funds showed that Money market funds, which invest mainly in money market instruments, such as treasury bills, closed the year under review with N614.697 billion. Equity Based Funds recorded N16.107 billion in 2022, Bonds and Fixed Income Funds amounted to N347.146 billion, while Dollar Funds comprises of Eurobonds and Fixed Income valued at N331.526 billion.

Also, Real Estate Investment Trusts, Balanced Funds, Ethical Funds and Shari’ah Compliant Funds valued at N45.656 billion, N30.127 billion, N2.950 billion and N22.837 billion.

Capital analysts noted that mutual funds are growing rapidly and are quickly becoming the default destination for Nigerians’ savings, saying that mutual funds are growing fast and becoming a large part of the savings industry.

Analysts at Coronation Asset Management said that in 2022 Nigeria’s mutual fund industry grew, as rising interest rates spurred savers to subscribe to Money Market funds while the desire to protect portfolios against currency devaluation prompted growth in US Dollar funds.

“Investors are increasingly turning to mutual funds for long-term savings and we forecast that the industry will grow again in 2023. That said, we believe that adoption of Global Investment Performance Standards (GIPS) is key to increasing both domestic and international participation in Nigerian mutual funds,” Coronation said.

They explained that clearly, individual Nigerian savers as well as companies are making the migration from keeping savings in bank deposits to saving in mutual funds, explaining that, an increasing number of savers prefer Money Market funds to deposit accounts and US Dollar funds to US Dollar domiciliary accounts. Fixed Income/Bond funds also confer advantages over Naira-denominated deposit savings accounts with banks.

The managing director of HighCap Securities Limited, Mr. David Adonri said, mutual fund investment has been widely embraced as a good investment platform in the developed economies, and serves as a vehicle for the mobilization of capital for economic development.

He noted the investors are now embracing mutual fund instrument to diversify their investment risks, especially, in the equities market, since investments in mutual funds are like investment in a basket of securities.

Also, chief operating officer of InvestData Consulting Limited, Ambrose Omordion said: “investment in mutual funds has over the years continued to increase especially as more investors become aware of the options this asset class provides. Going by the fact that mutual funds invest in various asset classes and are managed by professionals, investors are becoming more comfortable around the idea of investing their funds in any mutual fund that meets their investment needs, be it an equity fund, fixed income fund or a balanced fund. The increase in net asset is as a result of the options which have become available to investors.”

Omordion stated that “before now, mutual funds were a bit narrow and less understood by the market. As awareness increases, we have seen a rise in fund flow towards this asset class and in the medium term we expect this asset class to grow significantly especially given that the asset class is more liquid than other competing investments in the financial markets.”