FGN securities boost Pension assets’ to N22.5trn in 2024

At the end of 2024, the pension industry’s net asset value (NAV) grew by 23 percent on the back of yielding investments in Federal Government of Nigeria (FGN) securities, data from the National Pension Commission (PenCom) shows.

According to the report, the Assets Under Management (AUM) rose to N22.5 trillion from N4.2 trillion in March 2024 while Pension funds’ investment in FGN securities grew by 18 percent year-on-year to about N14.1 trillion in December 2024.

“The pension industry has continued to rise steadily, underscoring the impressive performance of the industry. In relative terms, the total pension assets made up only c.8% of Nigeria’s GDP in 2024, highlighting the underpenetrated state of the industry,” it said.

However, FGN Bonds are also another asset driving the asset concentration in government assets, constituting about c.53% of pension AUM. In terms of value, PFA’s holding of FGN paper increased by 5 percent year-on-year to N12 trillion.

According to PenCom, the considerable proportion of government securities in the overall AUM portfolio can primarily be attributed to PENCOM’s regulatory limits on investments.

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“The high interest rate environment in 2024, and the government’s increased borrowing need to plug the 2024 budget deficit also drove the year-on-year growth in investments in fixed-income securities,” it added.

To further illustrate the renewed interest in government assets, pension holdings in treasury bills more than doubled to N704.5 billion at the end of 2024 from N214.5 billion in the year-earlier period.

Analysis from FBNQuest Merchant Bank Research revealed that PFAs’ asset allocation to money market instruments also improved, with a robust year-on-year growth of 33 percent to N2.2 trillion, thanks to the elevated interest environment.

“Pension managers benefitted from the impressive performance of the domestic equities market last year, with the value of pension AUM increasing by N670.7 billion y/y to about N2.2 trillion last year,” it said.

It highlighted that the NGX market delivered a return of 37.7 percent y/y in 2024, driven by strong investor interest in some stocks across key sectors, such as oil and gas, banking and industrials.

“The total number of pension accounts also saw a modest rise of 4 percent y/y to almost 10.6 million. This implies an average value of N2.13 million per RSA account holder, well above the N1.80 million in the year-earlier period,” the research noted.