The National Pension Commission (PenCom) and the Pension Fund Administrators (PFAs) have teamed up to create a framework that will allow pension funds to be invested in dollar-denominated assets both inside and outside of Nigeria in order to address the further decline of pension assets’ investment in foreign money markets.
This was made clear in the monthly report published on the commission’s website, which showed a huge decline in pension fund investments in international money markets of 56.25 percent, from N32 billion in September 2022 to N18 billion in December of the same year.
According to the breakdown on PenCom’s website, the total investment in the markets made by Pension Fund Administrators (PFAs) in September 2022 was over N32 billion, while it was slightly less than N24 billion in October.
The investment in the portfolio continued its downward trend, falling from N24 billion to N17 billion in November before somewhat increasing to N18 billion in December.
It was anticipated that this would benefit the contributors and assist maintain the value of the pension funds.
Although if investment in the portfolios had been declining for the months mentioned, the overall assets had been steadily increasing ever since the program’s inception more than 12 years prior.
With N14.99 trillion and over nine million donors throughout Nigeria, the money have currently been distributed by PFAs under the regulator’s tight supervision to other instruments.
All fund managers operating under the scheme are expected to carry out their investment operations in accordance with the provisions of the Investment Regulation issued by the National Pension Commission, which is a regulation on the investment of pension fund assets.
The investment regulation, which lays out guidelines and requirements for pension fund investments, is the primary reference document for all investment activities carried out by pension operators in the nation.
Namely, the Investment Regulation specifies the permitted markets, permitted instruments, quality criteria, rating requirements, and general rules for the fund’s investment of assets from pension funds.
The Director-General of PenCom, Aisha Dahir-Umar, described the regulator’s goal as securing the assets of the contributors and noted that the agency’s efforts to diversify pension fund investments and combat inflation had gradually started to show progress.
She claims that a more detailed analysis of the investments reveals that N9.64 trillion, or 64.33 percent of the assets, was invested in Federal Government of Nigeria Securities, N1.66 trillion in corporate debt securities, N1.98 trillion in money market securities, and N82.8 billion in mutual funds, among other portfolios.
In its “Report on the Pension Industry Portfolio for the Period Ended December 31, 2022,” the Commission claims that The number of plan participants increased little, from 9.529 million at the end of 2021 to 9.862 million in the corresponding period, by 333,002.
In the third-quarter report for 2022, Dahir-Umar stated that: “Despite the overwhelming headwinds in the global economic climate and the country’s challenging macroeconomic environment, the pension fund assets under management increased.”
“The performance, in the growth of the AuM, points to the fact that the pension industry will continue to deliver value and benefit to its stakeholders and the nation’s economy.”
According to the director-general, PenCom steadily worked to increase the diversification of pension fund portfolios during the review period by stepping up efforts to ensure that pension funds are consistently invested in alternative asset classes and structured infrastructure projects that adhere to the strict standards outlined in the regulation for the investment of pension fund assets.
She stated that efforts were being made to ensure that the annualized average rates of return for heritage funds and retirement savings accounts were higher than the rate of overall inflation.
She reiterated: “Perhaps, the most significant achievement recorded in the third quarter of 2022 was the successful issuance of guidelines on accessing RSA “Balance towards payment of equity contribution for a residential mortgage.”
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