During the first half of 2023 (HI’23), Pension Fund Administrators (PFAs) in Nigeria experienced significant growth in their investments.
The Net Asset Value (NAV) of pension fund equity investments surged by 36.6%, reaching N1.460 trillion compared to N1.069 trillion in the same period of 2022 (H1’22).
PFA Invests more than N10 trillion in FG bonds
Furthermore, Pension Fund Administrators investments in Federal Government Bonds (FGN Bonds) also saw a substantial increase of 20.6%, rising to N10.858 trillion from N9.007 trillion in H1’22.
The recent auction of FGN Bonds attracted considerable interest, with a total subscription of N312.56 billion.
Experts in the investment field attribute the rapid growth of PFAs’ equity assets to the higher yields in the equities market.
However, these experts anticipate a potential shift in the second half of 2023 (H2’23) as the Central Bank of Nigeria continues to raise interest rates through the Monetary Policy Rate (MPR).
This may lead financial investment managers to migrate towards high-yielding debt instruments.
Mallam Garba Kurfi, the Chief Executive Officer of APT Securities and Funds Limited, pointed out that the increase in equity investment was driven by rising inflation rates, which negatively impacted fixed income returns.
Nevertheless, he expects a change in H2’23 as equity yields decline and debt instrument returns increase due to the ongoing rise in the MPR.
The recent FGN Bond auction, conducted amidst monetary policy tightening and uncertainties, offered four instruments to investors.
The 15.70% FGN June 2053 bond garnered strong interest with a bid-to-cover ratio of 2.71 times. Successful bidders were allotted a total of N227.76 billion across the four instruments, with varying allotment rates.