Despite lull in the bond market, the Pension Fund Administrators (PFAs) have invested N12.14 trillion from the pension fund assets into Federal Government of Nigeria(FGN) securities which includes; bonds and Treasury Bills (TBs), LEADERSHIP learnt.
The FGN bonds are still promising relatively low interest rates of 19 per cent far below inflation rate, yet, pension operators find solace in FGN securities as they see it as the only secured investment window.
The N12.14 trillion investment translates to about 60 per cent of the N19.5 trillion pension assets as at January, 2024.
The investment value is an accumulation from 2004 when the Contributory Pension Scheme (CPS) was established, till January, 2024.
Of the N19.5 trillion, N12.14 trillion was invested in FGN securities of which bonds attracted N11.59 trillion; treasury bills N221.81 billion; agency bonds N14.86 billion; sukuk bonds N124.89 billion and green bonds N181.57 billion.
However, the pension fund manager’s investment in federal government securities has allowed the government to fund its expenditure as well as embarks on some capital projects through this local borrowing, even as Pension Fund Administrators(PFAs) continue to see this instrument as a safe and the best investment option.
Investment income of which bulk comes from FGN securities investment, according to LEADERSHIP investigation, was instrumental to the continuous growth in pension fund now at N19.5 trillion, despite the fact that government at the state and federal levels are not paying the monthly pension contributions of their workers as and when due.
On the choice of investment, the chief executive officer (CEO) of the Pension Fund Operators Association of Nigeria(PenOp), Oguche Agudah, said, operators see FGN securities as a safe investment window with low risks, as opposed to other investment outlets, saying, the essence of the pension assets is to be able to pay contributors at retirement which is why Pension industry Investment Guidelines has been so strict on where pension funds can be invested.
Investment in FG securities, he said, gave assurance that pension funds are in a safe investment basket as the fund cannot deplete and will be available when needed.
Disclosing that, over time, pension fund operators have profitably invested the pension assets such that it is yielding good returns on investment, he added that, pension fund administrators will continue to look for additional viable investment options permissible under the law, to grow the assets to ensure that pension contributions can get values for their investment.
Similarly, experts at Coronation Asset Management, speaking on the choice of PFAs in FGN securities, noted that, a large sum of PFAs’ money may likely be tied up in funds for people close to retirement, adding that, these must be allocated to low-risk fixed income funds such as FGN Securities.
Similarly, the vice chairman, Highcap Securities, David Adonri, stated that, public debt constitutes the major portfolio of financial assets held by PFAs as they always want to maximise their returns in the debt market.
From January 2024, he said, it appeared that the Central Bank of Nigeria (CBN) adopted Open Market Operation(OMO) as a monetary tool to rein in inflation, hence, the apex bank sold a lot of Treasury Bills(TBs) at a very high discount rate, which elicited the influx of funds from PFAs to that space.
Interest rate hike up to June 2023, he noted, also attracted more investment in public debt by PFAs in 2023.
Earlier, the director general, PenCom, Aisha Dahir-Umar, said, the CPS has been very impactful in Nigeria since the commencement of its implementation in 2004.
To this end, she added that the formation of long term domestic capital, represented by the huge value of pension assets, belonging to over 10 million contributors, is slowly, but surely, changing Nigeria’s financial landscape.
This, by extension, she stressed, is also transforming the course and pace of socio-economic development in the country.
