A new report from CompanyNGR says low diversification of government securities by Nigerian Pension Fund Trustees (PFA) is one of the main challenges affecting the growth of the pension industry.

The report also notes that continued skepticism about the pension system has limited industry growth.

Other challenges hampering the desired growth in the industry include weak cooperation of public and private sector workers, low pension penetration in the informal sector, and limited investment options.

Nairametry reported last week that PFAs increased their investments in federal government securities by N184.47 billion in the third quarter of the year, bringing year-to-date investments to N418.73 billion at the expense of variable assets such as the stock market.

According to data from the National Pensions Commission (PENCOM)investments in federal government securities in September stood at 8.8 trillion naira, while exposure to PFAs in the Nigerian and overseas stock market decreased by 46.7 billion naira and 26.2 billion naira respectively. naira between January and September 2022.

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Meanwhile, the industry’s total pension fund grew by nearly 1 million naira (1.1%) in the first nine months of the year, with 263,359 new RSA registrations recorded in the past year. the period. As of September 2022, investments in federal government securities (8.8 trillion naira) accounted for 63.7% of total industry assets.

The big picture: Nigeria’s pensions sub-sector is a key segment of the economy that provides benefits to retirees, employers and governments. The subsector helps reduce tax burdens, protects and provides returns on employee retirement savings, reduces the retirement burden on employers, and provides funds for long-term investment.

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According to the report, the sub-sector paid N809.5 billion in lump sum benefits to retirees and a cumulative monthly pension of N12.8 billion. Furthermore, he estimated that the total value of assets under management is equivalent to 7.6% of Nigeria’s GDP at current market prices.

  • Reforms in the pensions subsector have accelerated transformation, but more needs to be done to increase growth.
  • Specific challenges include continued skepticism of the pension system, low diversification of pension fund investments outside of government securities, weak cooperation from public and private sector employers, low penetration of pensions in the sector informality, limited investment options and mono products, lengthy regulatory processes hampering service delivery and a poor macroeconomic environment,“, says the report.

On the other hand, the pension industry is highly regulated, which deals with public funds, hence the need to be careful while investing with these funds. However, regulators have created various products based on retiree risk appetite (RSA Funds), which have a mix of fixed and variable assets in different proportions.

About the report: The State of the Enterprise Report 2022 is a report that provides an overview of Nigeria’s Financial and Professional Services (FPS) industry, compiled by EnterpriseNGR to foster more even growth in the FPS industry.

The SFP sector includes the following subsectors: banking, insurance, capital markets, asset management, pensions, interest-free financing, FinTech, professional services (legal services, accounting and management consulting) and sustainable finance.