Pension funds managers are ramping up their investments in government securities as their portfolio went up 6.2 per cent to N9.008 trillion in the first half of 2022, H1’22, from N8.475 trillion in the corresponding period of 2021, HI’21.
The Federal Government securities targeted include: FG Bonds, Treasury Bills, Agency Bonds, and Green Bonds.
It is expected that more funds will go into this class of investment from the Pension Funds Administrators, PFAs, in the second half of the year, H2’22, as the Central Bank of Nigeria, CBN’s Monetary Policy Rate, MPR, trends up. The MPR has moved from 11.5 per cent to 14 per cent between May and July this year.
Data in the National Pension Commission, PenCom, shows that the Green Bonds recorded the highest growth, rising 428 per cent to N68.095 billion in H1’22 from N12.882 billion in H1’21.
H1’22: More Pension Funds Moving Into FG Securities, Up 6.2% To N9trn
This was followed by Sukuk Bonds which surged by 58.6 per cent to N136.606 billion from N86.096 billion. FGN Bonds came third recording 6.4 per cent growth to N8.313 trillion in H1’22 from N7.814 trillion in H1’21.
Agency Bonds went up by 1.7 per cent to N13.825 billion from N13.6 billion.
However, Treasury Bills investments declined 13.2 per cent to N475.636 billion in H1’22 from N548.132 billion in H1’21.
Reacting to this development, Analyst and Head of Investment and Research at Fidelity Securities Limited, FSL, Mr Victor Chiazor, said: “The rise in PFAs’ investments in Government Securities is triggered by the investment friendly rate environment during this period.
More of this investment is expected to be increased in the second half of the year as we get closer to the 2023 general election.”
In his own part, analyst and Managing Director/CEO of APT Securities and Funds Limited, Mallam Garba Kurfi, said: “The Investment in FGN Bonds by PFAs is necessary because of its low risk, higher yield and availability when compared with the other investments; more than N9.0 trillion in the Nigerian financial market were invested into Bonds.
There is a need for more financial products that is less risky and can give alternative higher yield to Bonds in the financial markets in order to attract Pensions Funds Investments.”