Nigeria’s pension fund industry witnessed significant growth in its assets, bolstered by robust investment income, even as the number of Retirement Saving Account (RSA) holders increased modestly. The July 2023 monthly report from the National Pension Commission (PenCom) reveals that Nigeria’s pension fund assets surged by N307.12 billion, soaring from N16.76 trillion in June 2023 to a substantial N17.01 trillion by July 2023. During the same period, the Contributory Pension Scheme (CPS) subscribers in the country grew by 16,265, reaching a milestone of 10.025 million subscribers in July, up from 10.009 million in June.
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The remarkable increase in pension fund assets can be attributed to several factors, including fresh contributions from contributors and significant gains in investment income. Notably, investments in Federal Government of Nigeria (FGN) securities, money market instruments, and selected mutual funds have thrived in the high-yield environment of the fixed-income market.
Composition of Pension Fund Assets:
A deeper analysis of the N17.01 trillion pension fund assets reveals that FGN securities constitute the lion’s share, accounting for 65% of the total assets. Specifically, Federal Government bonds have risen to N10.57 trillion, making up 95.8% of FGN securities, while treasury bills stand at N198.81 billion (1.8%). Other components include agency bonds at N10.98 billion (0.1%), Sukuk bonds at N154.75 billion (1.4%), and green bonds at N92.37 billion (0.8%). Beyond FGN securities, pension funds also invest in state government securities (N275.57 billion), corporate debt securities (N1.84 trillion), money market instruments (N1.59 trillion), and mutual funds (N121 billion).
Challenges in RSA Growth:
While pension fund administrators have effectively managed to expand the pension fund assets, the growth in the number of Retirement Saving Account (RSA) holders has been more sluggish. This underscores the challenges associated with a lower net addition to the scheme, driven in part by policy reforms that have impacted job creation and forced some RSA contributors into early retirement.
Conclusion:
Nigeria’s pension fund industry continues to experience substantial growth, with pension fund assets reaching N17 trillion and CPS subscribers surpassing the 10 million mark. Robust investment income and inflow of contributions have driven this expansion. Nevertheless, the industry faces the challenge of slower growth in RSA holders, highlighting the need for continued reforms and job creation to sustain and enhance the pension scheme’s coverage and effectiveness.
