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 61.5% of N15trn Pensioners’ Money Borrowed by Federal Government

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How 15,634 Retirees Withdraw N7.79BN to Exit Pension Scheme

Latest industry statistics by the National Pension Commission (PenCOm) has revealed that pension funds Assets Under Management (AUM) in the country rose to about N15 trillion as at December, 2022.

Out of this amount, a sum of N9.2 trillion equivalent to 61.5% of the total has been invested into bonds issued by the Federal Government Nigeria (FGN).

FGN borrowing of the pension funds in form of bonds which accounted for the largest share of pension funds AUM grew by 11% in 2022 to N9.2 trillion and contributed around 61.5% of PFAs’ funds under management.

Analysis of the data showed that investment in FGN Bonds increased by N894 billion as a result of the high-interest rate environment in 2022, which fuelled investor interest in fixed-income securities.

In contrast, the value of pension AUM held in domestic equities decreased marginally by 1% year-on-year to approximately N908 billion, slimming down its share to 6.1% from 6.8% in Dec 2021.

This was despite that the equity market delivered an annual return of 19.98% in 2022 buoyed by a strong performance in H1 ’22.

However, excluding the strong close in the final few weeks, the second half of the year 2022 was marked by a steady decline.

Thus, market analysts held that the recorded marginal decline in pension funds staked on equities by PFAs reflected loss of appetite by investors in the early most part of the second half of the year under review.

Aside FGN bonds and equities that attracted chunks of pension assets, corporate debt in the overall portfolio increased to 11.1% in December, up from 7% the previous year.

In terms of value, corporate debt increased by N717 billion to circa 1.7 trillion, representing an annual increase of 76%.

The issuance of large corporate bonds by Dangote Industries Limited, Dangote Cement, and MTN Nigeria totalling N188 billion, N116 billon, and N115 billion, respectively, was a major factor responsible for the sharp increase in corporate debt in 2022.

Following the scale of corporate issues by the three entities, debt issuance by other firms was quite limited during the year.

Meanwhile, according to the report, the total number of pension accounts increased by 3.5% year-on-year to almost 9.9 million.

This implies an average value of N1.52 million per Retirement Savings Account (RSA) account holder, slightly higher than the N1.41m in the year-earlier period.

Experts envisage that going forward, fixed income yields will remain elevated due to the anticipated increase in the supply of FGN paper by the Debt Management Office (DMO) as the agency tries to meet its domestic borrowing target to help plug the N10.8trn fiscal deficit.

The DMO had earlier disclosed plans by the federal government to borrow N1.2 trillion through bonds issuance in the first three months of 2023.

According to the DMO Calendar, the government is looking to sell between N320 billion and N400 billion worth of FGN bonds in each of three months in Q1 of 2023.

This prospect further opens wider doors of opportunity to Pension Funds Administrators (PFA) to lock Pension Assets Under Management in the securities especially as borrowing rates continue to look up and yield better returns.

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