Ebere Nwoji

Huge investments by pension fund managers in federal government securities have continued to yield optimum results, a report by the National Pensions Commission (PenCom) has revealed

In FY2020, investments by pension managers in federal government instruments generated 82.02 percent of the total interest return of 77.79 billion Naira earned by managers in the year under. review.

PenCom in its 2020 Industry Report posted on its website found that managers invested a total of 5.74 trillion naira in federal government securities in 2020.

The return, according to PenCom, represents an improvement over the 80% interest rate that managers earned in the pension fund investment in federal government securities in 2019. However, the overall return declined by 5.282 billion naira.

Since the inception of the contributory pension plan in 2004, pension fund managers and pension fund custodians who manage and invest the funds have always viewed federal government securities as the safest place to invest their funds. pension.

Despite stakeholder outcry over the need to invest funds in infrastructure development, more than 70 pension funds are being invested in federal government securities.

FGN securities preferred by pension managers include bonds; goods of treasure; agency obligations; Sukuk and green bonds.

PenCom explained that the fluctuation in interest rates on federal government securities was what forced aggregate interest rates on industry investments to drop by 5.282 billion naira to 773.70 billion. naira for the year under review against 816.84 billion naira in 2019.

PenCom maintained that the total investments in FGN Securities stood at N5.744 billion as of December 31, 2020, adding that the maturity profile of investments in FGN Bond ranged from 1 to 10 years and represented 68.78% of the value of RSA Active’s portfolio. Fund and that 91.58 percent of the Fund’s investments in FGN securities were in FGN bonds.

“A review of the bond portfolio reveals that the assets of the pension funds of Funds I and II are equally divided between durations of less than and greater than 10 years. However, in line with the demographics of Fund III contributors, investments in FGN bonds were primarily short and medium term maturities (less than 10 years) which represented 60.89% of the Fund’s FGN bond portfolio. .

“In the previous year 2019, the operators’ investments in funds I, II and III generated 816.84 billion naira in interest and coupons. During the same period, the total interest / coupons received from Fund I amounted to N2 billion, of which the commission said much of it came from investments in federal government securities, ”said the Commission.

According to PenCom, interest / coupons received from Fund II amounted to N509.47 billion, while dividends received were N29.77 billion. Interest / coupons received from investments in FGN Securities represented 80% of the total interest / coupons received during the year, he said.
The Commission noted that the interest / coupons received on Fund III amounted to 305.37 billion naira, while the dividends amounted to 5.54 billion naira.

He maintained that the net gain realized on the disposal of stocks and bonds on the funds was 11.52 billion naira, adding that this was mainly attributed to the gains made in funds II and III of 5, 97 billion naira and 5.21 billion naira, respectively, while Fund I recorded realized gains of 333 million naira during this period.

Overall, PenCom Chief Executive Officer Ms. Aisha Dahir Umar said in the report that the pension industry in 2020 had made significant progress in its quest to expand pension coverage, adding that the total number of members pension plans had increased by 3.60%, from 8,949,536 registered in 2019 to 9,271,665 as of December 31, 2020.

“This growth results from the concerted efforts of the commission and pension fund operators to ensure better compliance of public and private sector employers with the PRA 2014 and the growing acceptance of the micro-pension plan by the informal sector.

Likewise, she said that the net asset value of pension funds registered a growth rate of 20.45%, from 10.22 trillion naira in 2019 to 12.31 trillion naira as of December 31, 2020.

The report states that the Fund has reached N13tn and is expected to reach N20tn by 2020 if the current annual growth rate of 18% is maintained.

According to her, the main sources of growth were contributions, income from fixed and variable income securities and appreciation in the price of stocks and bonds.

“The funds have been invested in different asset classes including Federal Government of Nigeria (FGN) securities, state government securities, common stocks, 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 mostly invested in FGN securities, but the industry allocation to this asset class had decreased to 66.64 of the total portfolio value, from 71.90% in December 2019.