Pension Fund Administrators reduce investment by 30% in treasury bill

NIGERIA – In apparent response to the sharp decline in yields on treasury bills (TBs), Pension Fund Administrators (PFAs) have reduced the amount of pension assets investments in TBs by 30 percent to N1.37 trillion (US$3.51bn) in February from N1.88 trillion (US$4.81bn) in December 2019. 

Yield on one year TB has fallen by 946 basis points to 3.84 percent RECENTLY from 13.3 percent at the end of September 2019. 

In response to this development the PFAs increased the amount of pension assets invested in bank placements (fixed deposits) and corporate bonds by 40 percent and 18 percent respectively during the two months period. 

The National Pension Commission (Pencom) disclosed this in its February Monthly report on ‘Summary of Pension Assets’, which showed that total pension assets rose by 2.8 percent to N10.51 trillion (US$26.91bn) in February 2020 from N10.22 trillion (US$26.17bn) at the end of December 2019. 

According to the report, pension assets invested in bank placements (fixed deposits) rose to N1.48 trillion (US$3.79bn) in February from N1.06 trillion (US$2.71bn) at the end of December 2019, translating to 40 percent increase. 

Consequently, the share of bank placements in total pension assets rose by 372 basis points (bpts) to 14.05 percent in February from 10.33 percent in December 2019. Conversely, the share of TBs investment in total pension assets dropped by 538 bpts to 13.02 percent in February from 18.40 percent in December 2019. 

According to Vanguard, the PFAs also increased investment in corporate bonds by 18 percent or N95 billion (US$0.24bn) to N615.4 billion (US$1.58bn) in February from N519.6 billion (US$1,33bn) in December 2019. Consequently, the share of corporate bonds in total pension assets rose to 5.86 percent in February from 5.08 percent in December 2019. 

In the same vein, pension assets invested in FGN Bond rose by 4.8 percent to N5.62 trillion (US$14.39bn) in February from N5.35 trillion (US$13.70bn) in December 2019. As a result, the share of FGN Bonds in total pension assets rose slightly to 53.44 percent in February from 52.39 percent in December.