Nigeria’s pension asset jumps to N16.7 trillion in June 2023

Nigeria’s total pension assets jumped to N16.76 trillion in June 2023, representing a N1.77 trillion (12%) increase compared to N14.99 trillion recorded at the beginning of the year.

Also, total RSA registrations rose to 10 million from 9.86 million people as of the end of December 2022.

This is according to data compiled by Nairalytics from the National Pensions Commission (PenCom).

The current value of N16.7 trillion represents about 8.4% of the Nigerian economy (N199.3 trillion).

The Nigerian pension asset has been on the rise in recent years and more even in recent times, owing to improved regulation and competition in the industry.

Recall that the National Pension Commission announced the increment of the industry’s Minimum Regulatory Capital from N1 billion to N5 billion, a development which led to the consolidation, acquisition, and mergers of some PFAs.

In the same vein, the RSA transfer window, which allows RSA holders to transfer their accounts from one PFA to another has also helped to improve the level of competition in the Nigerian pension industry.

Specifically, according to data from PenCom, a total of 59,322 RSA holders switched their PFAs to another in H1 2023 compared to 21,157 holders recorded in the comparable period of 2022 (180% increase).

Notably, since the opening of the transfer window in November 2020, a total of 203,127 RSA holders have sacked their PFAs and switched their funds to another administrator.

This will help put the pension administrators on their toes to improve their services towards their customers as well as ensure improved and stable returns on investment of their customer funds.

Breakdown of assets by category

RSA Fund II accounted for most of the pension assets with a value of N7.15 trillion, representing 42.7% of the total pension fund. The fund category also grew by a whopping N654.1 billion within the period under review.
RSA Fund III followed with a sum of N4.56 trillion, accounting for 27.2% of the total fund, having recorded an increase of N411.4 billion in asset value in the first half of 2023.

Meanwhile, CPFAs accounted for 12% of the total market value with N2.02 billion.
Existing schemes and RSA Fund IV followed with N1.61 trillion and N1.26 trillion respectively.

Others include Fund I (N107.4 billion), Fund VI (N39.3 billion), Fund VI retiree (N4.86 billion), and Fund V (500.6 million).

Bumper growth in June

The Nigerian pension fund asset grew by an impressive 4.06% in June compared to the previous month where the fund stood at N16.11 trillion. This is the highest monthly growth recorded so far this year.

The growth was largely driven by increases in federal government securities, which rose to N10.86 trillion in June 2023 from N10.44 trillion recorded as of the previous month a 4% growth.

Meanwhile, investment in the equities market also rallied in the same period.

Investment in the domestic equities market rose to N1.27 trillion in June 2023 from N1.12 trillion in the prior month a 13.4% growth, while investment in foreign equities improved to N192.2 billion from N117.6 billion as of May 2023 a 63.4% growth.

It is worth noting that the sharp increase in the pension asset value may also be connected to the depreciation of the exchange rate as assets in foreign exchange will grow significantly when converted to the new exchange rate.

Recall that the CBN announced the harmonization of the exchange rates into one, which is now hovering over N700/$1 to N800/$1 from an average of N460/$1 at the official I&E exchange window.

Bottom line

The Nigerian pension industry has undergone significant transformation and recorded impressive growth over the years, evolving into a crucial component of the nation’s financial landscape.

However, despite the impressive growth witnessed in recent years, the adoption is very low compared to other contemporaries. With a total of 10 million RSA holders, it represents 5% of the population and 14% of the total labour force.

This is significantly low compared to the likes of South Africa, with an adoption rate of about 70%.

This disparity could be attributed to very high underemployment and underemployment rates.

Hence, the government need to develop policies that will help further strengthen the pension industry and encourage increased adoption both from the formal and informal sector.