Pension fund climbs 14% to N9.03trn in Q1

The asset value of pension fund in Africa’s biggest economy reached a record high of N9.03 trillion in the first quarter of 2019, data from National Pension Commission (Pencom) show, implying growing consciousness of pension savings among Nigerian populace.

This represent 14 percent or N1.09 trillion increase year- on- year over N7.94 trillion reported in the previous corresponding period.

Breakdown of the fund by schemes revealed that total Retirement Saving Account (RSA) fund worth N6.87 trillion, accounted for 76 percent in the total pension fund value, followed by Closed Pension Fund (13%) and Existing Schemes (11%).

Pension fund are in

vestment pools that pay for employee retirement commitment. Contributions are made both by the employer and employee according to 2004 Pension Reform act.

As the Act stipulates, pension fund managers are mandated to invest a tangible percentage of the fund in fixed income securities, and are prohibited from equity market and other asset classes.

RSA active funds (I, II & III) upped 16 percent to N6.27 trillion in 2019’s first quarter, while retiree funds (IV) jumped 123 percent to N732.4 billion.

Analysis of the data by asset class unveiled that N6.51 trillion, which equates 72.1 percent, are invested in Federal Government of Nigeria (FGN) securities, N478.1 billion in corporate debt securities, N874.4 billion in local money market securities and N24.9 billion in mutual funds.

Of the 6.51 trillion invested in FGN securities, N4.46 trillion went into FGN bonds, N1.94 trillion in treasury bills, N94.1 billion and N12 billion into green bond and Sukuk bond respectively.

The appreciation in the funds’ value outstripped that of the broader economy that grew 0.12 percent in the first three months of 2019 year- on- year basis, with the pension assetGDP ratio stuck at 28 percent.

Nigeria’s pension assetGDP ratio is small when compared with African peers. South Africa’s figure at 56 percent doubled that of Nigeria, and Kenya at 48 percent, according to available statistics from World Bank. Even Namibia whose economy size is 29 times lower than Nigeria has 85 percent pension assets-gdp ratio.

Even though pension funds face headwinds from the low interest environment, Nigerians are becoming aware of the importance of retirement planning given the fact that the number of contributors grew 7 percent to 8.57 million in 2019’s first quarter.

This implies 590, 000 more participants registered within 12 months to March 2019, with 130, 000 from public sector and 460, 000 from private sector.

36 percent of 8.57 million contributors are between 30 - 39 age range, 28 percent between 40-49 years, 18 percent between 50- 59 years, 10 percent below 30 years, 6 percent between 60-65 years, and 3 percent above 65 percent.

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: David Ogar