Kayode Tokede

The Pension Fund Administrators (PFAs) have increased investments in risk-free assets and raised stakes in the federal government’s securities and domestic stock market to N17.22 trillion in the first four months of 2025, data released by the National Pension Commission (PenCom) has revealed.

PenCom had strengthened the enforcement of restrictions placed on PFAs regarding the allocation of contributors’ funds into volatile assets.

The FGN Securities, according to PenCom, comprises:  FGN Bonds (HTM), Nigerian Treasury Bills (NTBs), Agency Bonds (NMRC), Sukuk Bonds, and Green Bonds.
The latest data by PenCom revealed that PFAs’ exposure in both FGN Bonds and the stock market opened January 2025 at N16.72 trillion, increasing by N510.65 billion or 3.05 per cent to close at N17.22 trillion in April 2025.

The breakdown revealed that PFAs’ stake in FGN bonds increased from N14.31 trillion in January 2025, about a 2.40 per cent increase, to N14.65 trillion in April 2025, while in the stock market, the PFAs’ exposure stood at N2.57 trillion, representing an increase of 6.9 per cent from the N2.41 trillion declared by PenCom in January 2025.

The combined PFAs’ investment in FGN securities and the stock market has contributed about 72.8 per cent of the N23.65 trillion net asset value as of April 2025.
Analysts have attributed PFAs’ increasing exposure in the stock market to the increasing fundamentals of some listed companies, stressing that lucrative yield and risk-free government securities continued to influence PFAs’ exposure in FGN Bonds.  

The likes of Nigerian Treasury Bills have witnessed significant patronage by investors in 2025 with yields of over 20 per cent on one-year auctions.

Local and foreign investors seem to respond positively to the double-digit interest rates on NTBs, as seen in the robust subscription rates, suggesting confidence in the CBN’s ability to manage the country’s monetary challenges amid scarcity of foreign exchange and a double-digit inflation rate.

Meanwhile, the participation by PFAs in the stock market in the first four months of 2025 lifted the market capitalisation by N3.73 trillion to N66.496 trillion as of April 30, 2025.

Analysts told THISDAY that PFAs are benefiting from the undervalued stocks amid the weakening of the naira and renewed investors’ confidence in the stock market.

They disclosed that the PFAs and domestic investors reacted sharply to the naira’s depreciation in the foreign exchange market, a double-digit inflation rate, and the CBN’s hike in the MPR, currently at 27.50 per cent.

They stated further that the pension industry has been recording significant growth in recent years, following several regulatory reforms by PenCom, which has seen the number of PFAs in the industry reduce as a result of some mergers and acquisitions.

The Vice President of Highcap Securities, Mr. David Adnorii, said the pension Industry operates under stringent regulations due to the nature of handling public funds, primarily the contributions of workers meant for their retirement.

According to him, PenCom enforces guidelines and limits to ensure the safety and security of contributors’ funds, as restrictions are placed on PFAs regarding the allocation of contributors’ funds into volatile assets.

“This cautious approach is in line with the need to protect contributors’ savings and ensure that they have a secure and reliable source of income during their retirement years.

To achieve this, the PFAs adopt a mix of fixed and variable assets in their investment portfolios.

“This diversified approach takes into consideration the risk tolerance of contributors and the different fund categories within the pension system,” he said.
Responding to PFAs’ exposure in the stock market, Investment Banker & Stockbroker, Mr. Tajudeen Olayinka, explained that PFAs and investors reacted to the low prices of some fundamental stocks on the exchange.

According to him, “Prices had become too low to resist, and this happened because of prolonged repricing of securities across markets and instruments, pushing down stock prices below the levels they should ordinarily be.

“It also demonstrates improved earning capacities of some listed companies, as they continue to adjust to the variability of costs and cost pressures in the short run, to stay afloat.

“Another factor is the usual positioning and repositioning for the year-end rally by investors, as some companies begin to show strong earnings’ prospects ahead of full-year results.”

On his part, Chief Research Officer, InvestData Consulting Limited, Mr. Omordion Ambrose, told THISDAY that low pricing of some fundamental stocks and portfolio rebalancing contributed to PFAs’ renewed interest in stocks.

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