The exposure of Pension Fund Administrators (PFAs) to Federal Government (FGN) securities has seen a remarkable growth of 18.5%, reaching a net asset value (NAV) of N14.1 trillion by the close of December 2024. This represents a notable increase from the N11.9 trillion recorded in the same period of 2023.
The National Pension Commission (PenCom) reported that FGN securities now comprise 62.6% of Nigeria’s total pension fund assets, which reached an impressive N22.5 trillion by the end of 2024. This marks a significant 22.9% year-on-year rise from the N18.3 trillion recorded in 2023.
This surge in FGN securities is largely attributed to the increased supply of government debt instruments by the Debt Management Office (DMO) aimed at meeting domestic financing requirements and addressing the fiscal gap in the 2024 Federal Government budget, pegged at N9.1 trillion.
For the year, PFAs were drawn to investing in FGN securities due to their stable returns and the favorable yield environment. The average Monetary Policy Rate (MPR), which sets the tone for lending rates across Nigeria, saw a significant uptick in 2024, climbing to 25.5% from 18.4% in 2023.
The rise in MPR made FGN securities a more attractive option for investors, given their relatively low-risk and consistent returns.
The FGN securities portfolio comprises various instruments, including Federal Government Bonds held to maturity (HTM), bonds available for sale (AFS), Treasury Bills, Agency Bonds, SUKUK Bonds (HTM and AFS), and Green Bonds. Among these, FGN Bonds remained the dominant asset class within pension funds, accounting for a substantial 93.6% of total FGN securities, with a total value of N13.2 trillion in 2024—up from N11.5 trillion in 2023.
Treasury Bills recorded N704 billion, a sharp rise from N214 billion the previous year. SUKUK Bonds, however, experienced a decline, with their value falling to N93.6 billion from N245.6 billion in 2023.
Commenting on these developments, seasoned investment banker and stockbroker, Tajudeen Olayinka, explained that the Central Bank of Nigeria’s (CBN) decision to raise the MPR has been a significant factor driving the increased investment in government securities.
“The CBN’s consistent rate hikes throughout 2024 created an environment that made government securities more attractive, providing a safe haven for investors amid rising inflation concerns and aiding the government in managing its budget deficit,” he said.
Ambrose Omordion, an analyst at InvestData Consulting, further noted that the increasing strength of FGN securities has been supported by renewed investor confidence and the relative weakness of the Naira.
He emphasized that the Nigerian pension industry, governed by strict regulations, continues to protect contributors’ funds through controlled investment strategies. “PFAs are restricted by PenCom from exposing pension funds to high-risk, volatile assets, ensuring that workers’ retirement savings remain secure while achieving steady returns,” he added.
The rise in pension fund investments in FGN securities reflects a growing trust in government-backed financial instruments and underscores the role of the pension sector as a key player in funding Nigeria’s fiscal needs. With further increases in pension fund assets, the trend towards safer, high-yield government securities is expected to continue in the years ahead.
