Ebere Nwoji
The huge investments made by Pension fund managers in federal government securities have continued to yield optimal results, a report by the National Pension Commission (PenCom) has revealed
As at 2020 business year, pension managers’ investments in federal government instrument generated 82.02 per cent of the total interest yield of N77.79 billion made by the managers during the year under review.
PenCom in its 2020 industry report published in its website revealed that the managers invested a total of N5.74 trillion in federal government securities in 2020.
The yield, according to PenCom, represents an improvement on the 80 per cent interest yield reaped by the managers in investment of pension funds in federal government securities in the year 2019.However the overall yield witnessed N5.282 billion decline.
Since the inception of Contributory Pension Scheme in the year 2004, the Pension fund managers and Pension Fund Custodians who manage and invest the funds have always seen federal government securities as safest place to invest pension funds.
Despite stakeholders’ outcry on the need to invest the funds in infrastructural development, over 70 pension of the funds is invested in federal government securities.
The FGN securities favoured by the pension managers include bonds; treasury bills; agency bonds; Sukuk and green bonds.
PenCom explained that fluctuation in interest yields in federal government securities was what forced the overall interest yields to the industry’s investment to slide by N5.282 billion to stand at N773.70 billion for the year under review against N816.84 billion in 2019.
PenCom maintained that the total investments in FGN Securities was N5.74 trillion as at 31 December 2020, adding that the maturity profile of the investments in FGN Bond ranged from 1 to 10 years and represented 68.78 per cent of the portfolio value of the RSA Active Funds and that 91.58 per cent of the Funds investment in FGN securities were in FGN bonds.
“A review of the Bond Portfolio reveals that pension fund assets of Funds I and II are equally split between tenures below and above 10 years. However, in line with the demography of Fund III contributors, investments in FGN bonds were mostly in short to medium term (below 10 years) maturity bucket that accounted for 60.89 per cent of the Fund’s FGN bond portfolio.
“In the preceding year 2019, operators’ investment into Fund I, Fund II and Fund III, generated N816.84 billion interest and coupon. In the same period, total interest/coupon received from Fund I, was N2 billion, of which the commission said large chunk came from investments in federal government’s Securities, “the commission said.
According to PenCom, Interest/coupon received from Fund II, was N509.47 billion, while dividend received was N29.77 billion. The interest/coupon received from investments in FGN Securities represented 80 per cent of the total interest/coupon received during the year, it said
The Commission noted that the interest/coupon received on Fund III was N305.37 billion, while dividends were N5.54 billion.
It maintained that the net realised gain on disposal of equities and bonds on the Funds amounted to N11.52 billion, adding that this was mainly attributed to realised gains in Fund II & III of N5.97 billion and N5.21 billion, respectively, while Fund I recorded realised gains of N333 million within that period.
In overall, PenCom Director General Mrs Aisha Dahir Umar, in the report said the pension sector in 2020 made significant progress in its quest to expand coverage of pension adding that total membership of the pension schemes increased by 3.60 percent from 8,949,536 recorded in 2019 to 9,271,665 as at 31 December 2020.
“This growth resulted from concerted efforts of the commission and the Pension Fund Operators to ensure improved compliance by the public and private sector employers with the PRA 2014 and the growing acceptance of the Micro Pension Plan by the informal sector.
Similarly, she said Net Assets Value of Pension Funds recorded a growth rate of 20.45 percent from N10.22trillion in 2019 to N12.31 trillion as at 31 December 2020.
The report said the Fund has hit N13tn and is expected to hit N20tn mark by the year 2020 if the current annual growth rate of 18 percent is sustained.
According to her, the major sources of growth were contributions, income earned on fixed and variable income securities, and price appreciation of equities and bonds.
“The funds were invested in different asset classes comprising federal government of Nigeria (FGN) securities, states government securities, ordinary shares, corporate debt securities, local money market instruments, supranational bonds, mutual funds, infrastructure funds, and private equity funds, “she said.
She said Pension fund assets were predominantly invested in FGN securities, but that the industry’s allocation to this asset class had declined to 66.64 of total portfolio value compared to 71.90 per cent of December 2019.
