Pension fund regulators should ensure full implementation of the contributory pension scheme as well as total compliance in both public and private sectors to mobilize all eligible funds for the growth of the economy, a report published by the Central Bank of Nigeria (CBN) has said.
The report tagged ‘Impact of The Contributory Pension Scheme on The Nigerian Capital Market’ was part of CBN’s Bullion publication for July-September 2023 and was authored by Dr. Ikeobi, Nneka Rosemary of the Department of Actuarial Science, Faculty of Management Sciences, University of Jos, Jos, Plateau State, Nigeria.
It noted that the full implementation will take full advantage of pension funds as a source of long-term finance for investment in the Nigerian economy by way of the capital market.
The paper which examined the impact of the contributory pension scheme on the Nigerian capital market from 2006 to 2020 using a regression model said:
- “Results revealed that both public sector pension fund and private sector pension fund showed significant positive impact on market capitalization indicating that the contributory pension scheme has positively impacted the Nigerian capital market and by extension the Nigerian economy by acting as a source of long-term funds for productive investment.
- Consequently, all efforts should be directed at improving on the efficient channeling of contributions from pension deductions to pension fund administrators who will have more funds that can be invested in the capital market”.
Well-developed financial system
The report noted that a well-developed financial system ensures that adequate funds are efficiently and effectively mobilized and allocated for productive investment which would ultimately lead to sustainable growth and development of the economy.
- “To achieve this objective requires mobilization of funds, particularly long-term funds, which are best sourced from the capital market.
- The capital market is that arm of the financial system with the responsibility of mobilizing the savings of individuals and households as well as institutions and channeling the same to business enterprises and governments who make use of them.
- The capital market does this by providing the platform where firms and government can sell financial securities in the form of shares and bonds and obtain the funds needed to carry out their long-term investment for the growth and development of the economy,” it said.
However, the report noted that the degree to which the capital market can intermediate between the savers and users’ units will depend not only on the savings habit of the populace but more importantly on how developed the capital market is.
Recent data from PenCom
Nairametrics reported recently that data from the National Pension Commission (PenCom) revealed Nigeria’s pension fund assets rose to N17.07 trillion for the period ended 31st July 2023.
This represents an increase of about 1.85% when compared to the N16.76 trillion that was reported as net asset value in June 2023.
This was contained in the commissions’ monthly report for July 2023.
Details of the report
Portfolio Allocation – According to the report, the total pension fund net asset value rose to N17 trillion in June compared to N16.7 trillion reported a month earlier.
- A closer look at the data reveals investment in FGN securities continues to dominate portfolio allocation with about N11 trillion or 64.7% of total net asset value (NAV).
- Portfolio allocation to FGN Securities was N10.8 trillion in June or 64.6% of total net asset values.
- Pension Funds also allocated N1.8 trillion to Corporate Debt Securities and N1.58 trillion to Money Market Instruments.
- Investments in ordinary shares of local companies rose to N1.338 trillion from N1.268 trillion in June.
It is not acceptable to be talking of July report in October. All indicies showed that more funds have been invested in government securities and equities by PFAs in September. Pencom can do better please. You need to build contributors confidence with early release of reports. We need to have your annual annual calendar stating report release dates and you stock to it.