Here’re top investments for pension funds in 2024

Since the introduction of the contributory pension scheme in 2004, pension fund assets in Nigeria have grown to N21.9 trillion, as of October 2024. Yet, 2024 has been a challenging year for the industry, as inflationary pressures and the Naira’s depreciation have cast a shadow over this growth, testing the resilience of pension fund strategies.

As of October 2024, Nigeria’s pension funds recorded a 19 percent return since the start of the year, though this translated to a stark double-digit real negative return when adjusted for inflation. In USD terms, the picture was even more striking, with pension fund assets shrinking by approximately $7 billion—from $20.2 billion at the year’s start to $13.3 billion by the end of October.

In this report, BusinessDay highlights some of the top-performing assets that pension funds have invested in during 2024.

1. Foreign Money Market Instruments – 204%

Between January and October 2024, investments by Nigerian pension funds in foreign money market instruments surged by an impressive 204 percent. These holdings grew from N48.9 billion at the beginning of the year to N148.6 billion by the end of October, essentially underscoring an increasing reliance on global financial instruments to preserve value amidst domestic headwinds.

The majority of investments in foreign money market instruments were driven by Closed Pension Fund Administrators (CPFAs), which hold approximately N134.3 billion in these assets.

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2. Treasury Bills – 146%

Treasury bills emerged as the second-highest-yielding asset class in pension fund investments for 2024. Between January and October 2024, treasury bills held by pension fund administrators increased from N214.5 billion to N527.1 billion.

The existing schemes held N143 billion worth of treasury bills, while Fund II schemes held N195 billion. Fund II pension funds are the contributory funds for people who are 49 years and younger.

During the year, CPFAs reduced their holdings of treasury bills, from N18.8 billion at the start of the year to N8.4 billion at the end of October.

3. Cash & Other Assets – 127%

PFAs increased their cash holdings in 2024, from N220 billion at the start of the year to N499.3 billion at the end of October 2024. Existing Schemes and PFAs were also the largest holders of cash and other assets with N165.5 billion and N155.3 billion respectively. Cash holdings also increased from 1 percent of the total net assets from the start of the year to 2 percent as of October 2024.

4. Private Equities – 72%

Private equities held by pension fund administrators grew by 72 percent, from N71.7 billion to N123 billion between January and October 2024. This growth indicates a strategic shift towards higher-risk, higher-reward investments, likely driven by the need to offset inflationary pressures and achieve stronger long-term returns.

The allocation to private equity grew from 0.39 percent at the start of 2024, to 0.56 percent at the end of October 2024. Under Nigeria’s pension regulations, a maximum of 5 percent of pension fund assets is permitted to be allocated to private equities.

5. Corporate bonds – 61%

The returns on corporate bonds increased by 61 percent, from N1.42 trillion at the start of the year, to N2.28 trillion at the end of October 2024. The bonds held to maturity totalled about N1.45 trillion, while those available for sale were about N832 billion.

As expected, the Fund II schemes held the most corporate bonds, around N674 billion, closely followed by Fund III schemes with about N460 billion. Pension funds are among the largest holders of corporate bonds in Nigeria, accounting for about 10 percent of their total assets, up from 8 percent at the beginning of 2024.