Since the introduction of the Contributory Pension Scheme (CPS) in 2004, Nigeria’s pension fund administrators (PFAs) have grown their combined assets to an impressive ₦22.3 trillion. Despite the economic challenges of 2024, including high inflation and naira depreciation, pension funds achieved a 21.2% return on investment between January and November 2024. However, this impressive nominal return translated to a negative real return when adjusted for inflation. Notably, PFAs reaped substantial gains from diverse investment channels, including foreign money market instruments, treasury bills, and private equities.
Nigerian pension funds recorded a remarkable 202% increase in investments in foreign money market instruments, rising from ₦48.9 billion in January to ₦147.8 billion by the end of October 2024. This growth was largely driven by Closed Pension Fund Administrators (CPFAs), which managed approximately ₦134.3 billion in these investments. CPFAs are entities that manage pension schemes established by employers before the enactment of the Pension Reform Act of 2004. Examples include Nestle Nigeria Trust CPFA, Progress Trust CPFA, Shell Nigeria CPFA, and Total Energies EP CPFA.
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Treasury bills (T-bills) emerged as a top-performing asset class for Nigerian PFAs in 2024. Between January and November, T-bill holdings increased significantly, from ₦214.5 billion to ₦575.2 billion. Fund II schemes, catering to individuals aged 49 and younger, accounted for ₦192.7 billion of these investments, while existing schemes held ₦170.6 billion. Interestingly, CPFAs reduced their T-bill holdings during this period, declining from ₦18.8 billion in January to ₦8.6 billion by November.
Cash holdings by pension funds rose substantially in 2024, increasing from ₦220 billion at the start of the year to ₦541 billion by November. Fund II schemes and existing schemes held the largest shares, with ₦137.1 billion and ₦227.7 billion, respectively.
Private equity investments by PFAs grew by 78%, rising from ₦71.7 billion to ₦127.8 billion within the review period. This reflects a strategic pivot toward higher-risk, higher-reward assets, driven by the need to combat inflation and secure stronger long-term returns. Private equity allocations increased from 0.39% at the start of 2024 to 0.57% by November. Under Nigerian pension regulations, PFAs are permitted to allocate a maximum of 5% of their assets to private equities.
Corporate bonds, including Sukuk bonds, also yielded strong returns, increasing by 70.8% in 2024. Investments in this category grew from ₦128.8 billion in January to ₦220 billion by November.
