Pension Fund Investment In FG Securities Rise By 16.5% To N9.9trn

Pension Fund investment in Federal Government debt instruments (securities) rose 16.5 per cent, year-on-year to N9.9 trillion in February caused by the high interest rate regime prompted by the inflation fighting measures of the Central Bank of Nigeria, CBN.

Since June last year, the CBN, has raised the Monetary Policy Rate, MPR, five times and by 650 basis points to 18 per cent in a bid to curtail steady rise in the inflation rate to 21.9 per cent in February.

The MPR is the benchmark for determining the interest rate charged by banks and also influences the yields on fixed income securities.

The hike in MPR prompted a general rise in interest rates with yields on one month deposits rising to 7.56 per cent in February from 3.57 per cent in May last year. Similarly, the interest rate on the Federal Government’s 3-years Savings Bonds rose to 11.04 per cent in February from 8.93 per cent in May last year.

In a bid to take advantage of this development, Pension Funds increased investment in government debt instruments or securities by 16.5 per cent year-on-year to N9.9 trillion in February from N8.5 trillion in February 2022.

The Federal Government securities include FGN Bonds, Treasury Bills, Agency Bonds, Sukuk, and Green Bonds.

The latest data from the Nigeria Pension Commission, PenCom, showed a steady rise in pension fund investment in FG securities since the first quarter, Q1’22, when it fell quarter-on-quarter, QoQ by 3.1 per cent.

In Q2 ‘22 pension fund investment increased to N9.007 trillion representing QoQ growth of 5.9 per cent; in Q3’22 the investment value increased further by 2.1 per cent QoQ to N9.192 trillion while in Q4’22 the investment value rose QoQ by 2.7% to N9.644 trillion.

Though pension fund investment in government securities fell marginally by 1.0 per cent, month-on-month, MoM, it however rose by 4.2 per cent, MoM to N9.8 trillion in February.