Nigerian pension fund asset rises to N12.8 trillion as RSA contributors hits 9.4 million

Nigeria pension

Nigeria’s overall pension asset value increased by N123.47 billion to N12.78 trillion in July 2021, up from N12.66 trillion the previous month. This information is given in the National Pension Commission’s pension funds industry report for the review month.

According to the study, Nigeria’s pension fund’s net asset worth increased by 0.98 percent in July 2021, while 22,349 RSA registrations increased total contributors to 9.4 million.

A brief examination of the statistics reveals that the value of pension assets increased by N474.49 billion between January and July of this year. Similarly, 189,765 additional donors have been added to the scheme year to date.

Pension fund managers in Nigeria have been posting exceptional year-to-date returns on their various portfolios, owing to their systematic investments designed to outperform their industry competitors. Bear in mind that competition in the business has increased tremendously as contributors can now quickly switch administrators.

According to a recent Nairametrics report, 70% of the 22 PFAs experienced positive growth across their four retirement savings account funds (RSA I–IV), with Stanbic IBTC, Veritas Glanvills, and APT Pension topping the list of best-performing PFAs between January and July 2021.

Breakdown

  • As of 31st July 2021, the majority of funds were invested in FGN Securities, accounting for 64.2 percent of total funds at N8.1 trillion. However, a month-on-month comparison reveals a 3.2 percent fall in investment in FGN securities during the review month.
  • With a value of N2.1 trillion, local money market instruments accounted for 16.5 percent of total pension fund assets. It increased by a substantial 21.4 percent from N1.74 trillion in the previous month.
  • On the other side, mutual fund investments totalled N116.26 billion, or around 0.9 percent of the pension fund’s total assets. Despite its insignificant contribution, it decreased by 0.1 percent in the review month, falling to N116.3 billion in June 2021.
  • By fund type, RSA fund II accounted for the majority of funds with N5.59 trillion, accounting for 43.8 percent of industry funds, followed by RSA fund III with N3.35 trillion, accounting for 26.23 percent of the total.
  • The RSA V fund had the lowest value at N117.28 million.

Pension

While the growth in the number of RSA registration seems to be increasing in a linear form, it is still minimal compared to Nigeria’s labour force or working population. In context, Nigeria’s labour force data, as released by the National Bureau of Statistics (NBS), shows that 30.57 million and 15.92 million Nigerians are fully and underemployed, respectively.

Simple computation of the total 46.5 million employed Nigerian indicates that only 20% of the working population is currently captured in the Nigerian pension fund scheme. This is significantly low for a country that boasts of being the largest economy on the continent.

Meanwhile, South Africa’s Government Employees Pension Fund (GEPF), with a lesser population, boasts of Africa’s largest pension fund with over 1.2 million active members and assets in excess of R1.61 trillion (N46.3 trillion).

What Nigerians think about Nigerian Pension funds

In a conversation with Mr Daniel Azumara, a Business Developer, he expressed dissatisfaction with pensions in Nigeria, submitting that he had not received any form of information concerning his pensions account since it was introduced to him in his first place of work.

“I have no idea what is going on with my pensions account, or even if my organisation actually remits my quota despite deductions every month,” he said.

He also touched on the fact that Nigerians are not really the saving type, especially when it comes to the unforeseeable future.

“We Nigerians are very traditional people with a similar culture that whatever happens to us is by God, hence we feel no need to save for retirement. If I am being asked if I would register as a pension contributor, without my organisation’s influence, I would not. This is because, we Nigerians are low-income earners and would want to survive first before thinking of saving, much less for retirement,” he opined.

Similarly, Aderotimi Thompson, an investment analyst, addressed the issue of Nigeria’s pension industry and Nigeria’s low penetration in the space. According to him, he does not feel the need to save in a retirement savings account and would prefer to invest in more flexible investment portfolios.

He also cited that Nigerians are not necessarily concerned about retirement savings, especially when they are not making enough. Even if they want to save, they would prefer to invest in instruments that could give them quick returns.

While the number of RSA registrations appears to be expanding linearly, it remains insignificant in comparison to Nigeria’s labour market or working population. In context, Nigeria’s National Bureau of Statistics (NBS) statistics indicates that 30.57 million and 15.92 million Nigerians, respectively, are fully and underemployed.

A simple calculation of Nigeria’s total employed population of 46.5 million suggests that the Nigerian pension fund system currently covers just 20% of the working population. This is a shallow figure for a country that prides itself on having the continent’s largest economy.

Meanwhile, despite its smaller size, South Africa’s Government Employees Pension Fund (GEPF) is Africa’s largest pension fund, with over 1.2 million active members and assets exceeding R1.61 trillion (N46.3 trillion).

Nigerians’ perceptions of Nigerian pension funds

Mr Daniel Azumara, a Business Developer, voiced discontent with pensions in Nigeria, claiming that he had not got any information about his pension account since it was given to him at his first job.

“I have no idea what is going on with my pension account, or even if my employer remits my quota despite monthly deductions,” he explained.

He also mentioned that Nigerians are not known for their conservatism, particularly when it comes to the unknown future.

“We Nigerians are a very traditional people who believe that whatever happens to us is God’s will, and hence have no need to save for retirement. If I am asked if I would contribute to a pension plan without the influence of my organization, I would say no. This is because we Nigerians are low-income earners who prioritize survival over saving, much less for retirement,” he said.

Similarly, Aderotimi Thompson, an investment analyst, discussed Nigeria’s pension industry and the country’s poor penetration. According to him, he is not motivated to save for retirement and would rather invest in more flexible investment portfolios.

He also stated that Nigerians are not overly concerned with retirement savings, particularly when their income is insufficient. Even if they do want to save, they would rather invest in instruments that provide immediate returns.

Bottom line

Nigeria’s pension fund assets have grown significantly so far in 2021. However, it still has a long way to go in terms of registering and contributing to the plan. This may begin to occur as a result of Nigerians experiencing exceptional development in their various investment plans.

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