Pension Fund Administrators have withdrawn their investments from mutual funds in the capital market, instead channeling their funds into Federal Government securities and money market instruments.
The National Pension Commission’s recent report on the Pension Funds Industry Portfolio for April 2024, investments in mutual funds experienced a significant decline.
The report shows that mutual funds plummeted by 19.93% month-on-month, falling from N106.39bn to N85.19bn.
While mutual funds dipped, inflow to the FGN Securities, which includes bonds, treasury bills, sukuk bonds and others rose by 1.61 per cent to N12.40tn from N12.20tn.
Similarly, inflow to money market instruments comprising fixed deposits, commercial papers and foreign money market instruments went up by 9.70 per cent to close the month at N1.95tn.
On the equities market front, interest in domestic ordinary shares waned by 12.47 per cent to N1.82tn from N2.08tn in the previous month.
This was contrary to the trend in the first quarter of the year when PFAs increased their stakes in the equities market to about 11.79 per cent equal to N2.32tn in March 2024 from 8.97 per cent or N1.77tn in December 2023.
Analysts at the Pension Fund Operators Association of Nigeria interpreting the trend said that it reflected a growing confidence in the equity market among pension fund operators.
Despite the waning interest in local securities, the interest in foreign shares increased in April by 4.08 per cent, as operators poured about N2.07tn into equities in April.
On the whole, the value of Nigeria’s pension funds rose to N19.79tn during the period under review, following a 0.47 per cent decline that it recorded in March.
Similarly, the membership of the Retirement Savings Account also grew by 0.33 per cent month-on-month.to 10,315,034 from 10,280,956 in March.
In dollar values, the pension funds stood at $14.88bn at the rate of N1,329.71/$ as of the end of April.
In March, the figure was $14.79bn, when the exchange rate was N1,544.08/$.
The marginal dip in Nigeria’s pension funds in March was the first decline recorded in 18 months, according to report.
Experts attributed the decline in March to pension fund operators rebalancing their portfolios.
Meanwhile, the Chartered Institute of Stockbrokers has urged Pension Fund Administrators to increase their investment in the stock market.
Mr Oluwole AdeosunThe immediate past President and Chairman of the CIS Council, made the demand during a courtesy call on Olayemi Cardoso, the Governor of the Central Bank of Nigeria.
He noted, “Pension funds are globally the foundational base that drives sustainable liquidity for the local equity market. While the Pension Act permits the pension fund administrators to invest up to 25 per cent of their pension assets in the equity arm of the capital market, we have noticed that about 10 per cent of the funds are invested in the equity market, despite the enhanced regulation, investor protection, and high return in the market.
“Given the critical role of pension fund investment in galvanising liquidity in the domestic equity market, pension fund administrators should be investing a substantially higher proportion of their funds in equities. We, therefore, seek the support of the CBN to engage with PENCOM in this regard.”
