Pension assets dip
The National Pension Commission (PenCom) has reported a ₦90 billion drop in pension assets in Q1 2024, from ₦19.75 trillion to ₦19.66…
The National Pension Commission (PenCom) has reported a ₦90 billion drop in pension assets in Q1 2024, from ₦19.75 trillion to ₦19.66 trillion due to low market patronage. Despite this, the equities market saw an increase in investments, rising from ₦1.77 trillion in December 2023 to ₦2.3 trillion by March 2024, accounting for 11.79% of total pension assets. The Executive Secretary of the Pension Fund Operators Association of Nigeria (PenOp), Oguche Agudah, noted an increase in domestic equities allocation from 8.56% to 9.89% of total assets. He added that foreign ordinary shares also contributed, boosting the value of foreign assets by over ₦118 billion.
Since the inception of the current contributory pension regime in 2004, notable progress has been achieved, particularly in ensuring the security and growth of contributors’ funds. However, the sector faces several threats. Firstly, inflation consistently outpaces interest rates, leading to a decline in the real value of assets annually. Secondly, job losses and emigration have resulted in significant withdrawals in recent years. Thirdly, some subnational governments have failed to provide the required counterpart funding for their employees, indicating a lack of adoption of the scheme. Fourthly, government officials and legislators discussing using pension assets for infrastructure development without clear guidelines pose potential risks to the scheme. Efforts are underway to diversify the types of investments pension funds can pursue. Given the promising performance of the equities market, this is a matter worthy of serious consideration. Various proposals have emerged in the past decade to allow government access to these funds for infrastructure projects. While there are risks associated with government mismanagement, it may be necessary to explore ways to allocate portions of the fund to high-quality projects while mitigating these risks. One approach could involve limiting investments to projects syndicated with reputable multilateral organisations such as the International Finance Corporation (IFC) and the Africa Finance Corporation (AFC). Nigeria’s pension funds must explore opportunities beyond the domestic market in a structured, transparent, and orderly manner.