NIGERIA’S PENSION INDUSTRY WITNESSES RECORD-BREAKING GROWTH, ADDING N3.36 TRILLION IN 2023
Nigeria’s pension industry witnessed a remarkable gain of N3.36 trillion in 2023, concluding the year at a record high of N18.36 trillion, up from N14.99 trillion in the previous year.
This represents a year-on-year increase of 22.43%, marking the fastest growth ever recorded. The data is based on the unaudited report on pension fund portfolios released by the National Pension Commission (PenCom).
The total number of RSA registrations reached 10.19 million by the end of December 2023, reflecting a 3.3% increase from the 9.86 million recorded at the end of 2022.
Breaking down the portfolio, investments in federal government securities (N11.92 trillion) accounted for 64.9% of the total assets, aligning with PenCom regulations that emphasize investing most contributions in less risky assets like FGN bonds and treasury bills.
Corporate debt securities (N1.91 trillion) constituted 10.2% of the assets, while investments in the Nigerian equities market (N1.57 trillion) contributed 8.6% to the total. Money market instruments received a total investment of N1.67 trillion, making up 9.1% of the total pension assets.
In terms of fund category breakdown, Fund II maintained dominance with a total asset value of N7.8 trillion, accounting for 42.5% of the funds. This fund is the default choice for contributors below the age of 49, allowing PFAs 55% 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 experienced significant growth in recent years, with its penetration rate increasing. In the last five years, the industry’s asset value has more than doubled, driven by various reforms shaping the sector.
One such policy involves increasing the minimum regulatory capital requirement for PFAs from N1 billion to N5 billion, leading to mergers and acquisitions. Before the recapitalization in 2021, there were 22 PFAs, and following the implementation, the number reduced to about 19, with more mergers anticipated in 2024.
Additionally, the restructuring of major commercial banks into holding companies, with diversified interests in the pensions industry, enhanced competition. New players like Access Pensions, Norrenberger Pensions, GT Pensions, and Tangerine have contributed to increased growth in the industry.
In a significant development, Access Holdings announced that its subsidiary, Access Golf Nigeria, received regulatory approval to acquire a majority stake in ARM Pension Managers, a move that could further reduce the number of PFAs.
A total of 101,820 Retirement Savings Account (RSA) holders switched their Pension Fund Administrators (PFA) in 2023, representing a 10.2% increase compared to the 92,413 transfers recorded in the previous year, marking the highest on record.
The transferred amount by RSA holders in the review year was N462 billion, a 28% increase from the N361.5 billion transferred in the previous year, bringing the total since the inception of the transfer window to N1.14 trillion.
This transfer aligns with section 13 of the Pension Reform Act (PRA) 2014, specifying that an RSA holder may transfer their account from one PFA to another.
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(From the Tobi Adetunji: The News Source: Techeconomy)
