Nigeria’s pension industry gains N3.36trn in 2023
Nigeria’s total pension asset gained a remarkable N3.36 trillion in 2023, closing the year at a record high of N18.36 trillion from N14.99 trillion recorded as of the previous year. This represents a year-on-year increase of 22.43 percent, which is the fastest growth on record.
This is according to the unaudited report on pension fund portfolio as released by the National Pension Commission (PenCom). Also, the total number of RSA registrations hit 10.19 million as of the end of December 2023, reflecting a 3.3 percent increase from 9.86 million recorded as of the end of 2022.
A breakdown of the portfolio showed that investments in federal government securities (N11.92 trillion) accounted for 64.9 percent of the total assets, which is in line with PenCom regulation to invest most of the contributions in fixed less risky assets like the FGN bonds, treasury bills, etc.
Additionally, corporate debt securities (N1.91 trillion) accounted for 10.2 percent of the assets, while investments in the Nigerian equities market (N1.57 trillion) contributed 8.6 percent to the total.
A total of N1.67 trillion was invested in money market instruments as of the end of the year, accounting for 9.1% of the total pension assets.
In terms of breakdown by fund category, Fund II continues to dominate with a total asset value of N7.8 trillion, accounting for 42.5 percent of the funds. This is the default fund for contributors below the age of 49 years as it allows PFAs 55 percent of the portfolio in variable instruments.
Fund III followed with a total portfolio of N4.94 trillion, while Fund V recorded the least amount of N731.4 million.
The Nigerian pension industry has recorded significant strides in recent years, as represented in its growing penetration rate. In the last five years, the industry asset value has more than doubled, following several reforms that shaped and is still shaping the industry.
One of such policies include the increment of the minimum regulatory capital requirement for PFAs from N1 billion to N5 billion, triggering a series of mergers and acquisitions in the industry.
A move which was aimed at fortifying the financial capacity of the pension administrators.
Recall that before the recapitalisation in 2021, there were 22 PFAs, however following the implementation, the number of players reduced to about 19, with more anticipated mergers in 2024.
Also, the restructuring of some major commercial banks into Holding companies, with diversified interest in the pensions industry spurred improved competition in the industry.
New players such as Access Pensions, Norrenberger Pensions, GT Pensions, Tangerine amongst others have helped to drive increased growth in the industry through market efficiency and profitability.
Access Holdings recently announced that its subsidiary, Access Golf Nigeria has received the necessary regulatory approval to acquire a majority stake in ARM Pension Managers, a move that could further reduce the number of PFAs.
