PFAs invest N1.779tn in money market instruments to strengthen economy, secure pensioners’ future

As of the end of March 2024, Pension Fund Administrators (PFAs) in Nigeria have strategically invested N1.779 trillion of the total funds under the Contributory Pension Scheme (CPS) in various money market instruments. This significant allocation includes fixed deposits, commercial papers, bank acceptances, and foreign money market instruments, aimed at ensuring stable returns and contributing to the nation’s economic stability.

The National Pension Commission (PenCom) revealed these details in its ‘Unaudited Report on Pension Funds Industry Portfolio for the Period Ended 31 March 2024,’ titled ‘Approved Existing Schemes, Closed Pension Fund Administrators, and RSA Funds (Including Unremitted Contributions @CBN & Legacy Funds).’

Investment Breakdown

• Fixed Deposits and Bank Acceptances: N1.393 trillion
• Commercial Papers: N299 billion
• Foreign Money Market Instruments: N86.169 billion

The report also highlighted that the remaining pension funds were invested in domestic and foreign ordinary shares, Federal Government securities, corporate debt securities, and mutual funds. The total funds under the CPS during the reviewed period amounted to N19.669 trillion.

Regulatory Guidelines and Governance

PenCom’s investment regulations require PFAs to maintain a Multi-Fund Structure to govern the investment of RSA fund assets. In line with the Pension Reform Act 2014 and other corporate governance guidelines issued by the Commission, each PFA must establish an Investment Strategy Committee and a Risk Management Committee to ensure prudent and ethical management of pension funds.

Implications for Nigerians and the Economy

1. Stable Returns for Pensioners: The investment in fixed deposits and commercial papers ensures stable and predictable returns for retirees, fostering confidence in the pension system.
2. Economic Stability: Allocating funds to money market instruments enhances the liquidity and stability of the financial system, supporting steady economic growth.
3. Boosting Financial Sector Confidence: Significant investment in domestic instruments signals strong confidence in Nigeria’s financial sector, potentially attracting further domestic and international investments.
4. Encouraging National Savings: Prudent and diversified investment strategies by PFAs can encourage more Nigerians to participate in the Contributory Pension Scheme, thereby increasing national savings.
5. Supporting Corporate Financing: Investment in commercial papers provides essential short-term funding for businesses, spurring corporate activities, job creation, and economic development.
6. Enhanced Regulatory Oversight: PenCom’s stringent guidelines and oversight ensure high standards of governance and risk management, protecting contributors’ and retirees’ interests.
7. Foreign Investment Potential: Diversification through foreign money market instruments helps manage risks and integrate Nigeria into the global financial market, attracting foreign capital inflows.

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