As the low-interest regime that characterized most of 2020 continues with no immediate sign of an increase, pension fund managers have also continued to rid their portfolios of treasury bill investments.
Analysis of the recently released September 2020 edition of Pension Fund assets, by the Pension Commission of Nigeria, PenCom, shows that pension fund managers reallocated their assets away from treasury bills to FGN Bonds.
In the month of September 2020, according to the latest report, pension fund managers closed out of treasury bill positions worth N0.224 trillion while loading up on FGN bonds worth N0.254 trillion. Since the beginning of 2020, pension fund managers have moved out about N1.112 trillion of treasury bills investments into mostly FGN Bonds.
At the beginning of 2020, total pension fund assets invested in treasury bills stood at N1.88 trillion, but that has fallen to N0.78 trillion as at the end of September 2020. Put in another way, as at the end of 2019, 18.4% of pension fund assets were invested in treasury bills but as at September 30, 2020, pension funds’ treasury bill investment stood at 6.7%
Implications for domestic borrowing and monetary policy
Treasury bills serve a whole lot of purposes for the government. They are used as a means for the government to borrow to cover short term budgetary deficits as well as a means for the Central Bank to manage the supply of money and its inflationary effects.
With the increasing and seeming lack of interest by pension fund managers, who, usually are big players in the treasury bill market, the government may find it a bit problematic raising the much-needed domestic borrowing from them.
In like vein, the Central Bank’s ability to implement monetary policies through treasury bills and others, open market operation, may also suffer. May be, fiscal policy may become a more potent instrument of economic management, if that happens.