BY BAMIDELE FAMOOFO
The National Pension Commission recently released data indicating that the total assets under management in Nigeria’s pension industry had reached N15.45 trillion as of February 2022, representing a 1.2 percent increase from the previous month and a 12.2 percent increase year-on-year.
The figures demonstrate healthy growth and an increase in total industry assets of N1.7 trillion over the past 12 months, a report compiled by Cowry Assets Management Limited hinted.
While the post-Covid-19 era has seen significant growth in Nigeria’s regulated pension industry, including mergers and new regulatory guidelines designed to increase the pension asset pool and social security, there is still significant room for growth.
Analysts at Cowry Assets further stated that the creditable increase in total assets in Nigeria’s pension industry still stays underpenetrated with pension assets to GDP ratio of just 7.8 percent (with the year 2022 GDP).
The underpenetrated state of the industry is also reflected in the low subscription rate of the population to retirement savings accounts (RSA) which amounted to 9.92 million as at February ending (9.59 million in February 2022), representing around 8 percent of the working-age population. Meanwhile, the ratio is slightly higher as a proportion of the labour force at around 14 percent.
“Although Nigeria’s pension sector has grown remarkably since the passage of the Pension Reform Act in 2004, there is still much ground to cover. This can be achieved through investor education, more robust investment options such as offshore assets and alternative investments, and efforts aimed at driving significant penetration into the market,” the report disclosed.
Over the years, PFAs have seen their investment options primarily focused on federal government paper, particularly the FGN Bonds valued at N9.5 billion (N8.5 billion in February 2022) according to the latest figure in February and then treasury bills primary market auctions have had fund managers hold a portion of the total amount on auction as well as in state government bonds.
Also, despite the repricing of fixed income instruments due to interest rate movements, a total of N1.66 trillion and N1.69 trillion has been invested in the fixed income and money market.
Till now, myriad of challenges such as Nigeria’s low level of pension coverage due to a high level of informal employment, low levels of awareness, and a high rate of unemployment estimated at 33.3% based on 2020 data from the National Bureau of Statistics, have befallen the industry and to an extent cause a marginally stunted growth over the years.
“Although Nigeria’s pension sector has grown remarkably since the passage of the Pension Reform Act in 2004, there is still much ground to cover. This can be achieved through investor education, more robust investment options such as offshore assets and alternative investments, and efforts aimed at driving significant penetration into the market”
Granting the introduction of the Micro Pension Scheme in Nigeria in 2019, the scheme is aimed at providing pension coverage to individuals in the informal sector of the economy, there is still a significant distance to travel in achieving this goal.
“In our opinion, we think it pertinent to iterate on driving growth which can lead to a more robust economy with positive growth trajectory in double-digit or above the current level as catalyst for improved employment; but the insalubrious rate of inflation which will call for further tightening stance by the monetary authority fly as negative headwind as rising policy rates stands as onslaught to growth. This re-echoes the need for policymakers and industry regulators to create awareness around unlimited benefits of pension schemes post-retirement,” Cowry noted.
Last month, PenCom released the Status of Contributory Pension Assets which revealed an increase of 20 Trillion to closed at N14.99 trillion approximately as at the end of December 2022 compared to the N14.79 trillion as at the end of November 2022
The Commission’s report also stated that the Contributory Pension Assets increased by approximately N199.17 billion in December 2022 compared to an increase of N204.73 billion in November 2022.
The PenCom management also listed the top seven places where pension funds were invested as at December 2022, with percentage invested, they were: Total FGN Securities N9.64 Trillion (64.33%); Money Market Instruments N1.98 Trillion (13.23%); Corporate Debt Securities N1.66 Trillion (11.07%); Domestic Ordinary Shares N908 Billion (6.06%); Real Estate N218 Billion (1.45%); State Government Securities N166 Billion (1.11); and Infrastructure Funds N113 Billion (0.75%).
