The value of Nigeria’s pension fund assets dipped by ₦58.21 billion from ₦12.306 trillion recorded in December 31 2020 to ₦12.247 trillion in February 2021, the latest report from PenCom has revealed.
The drop, which represented 0.47%, occurred as a result of the fall in the bond prices in the trading portfolios of pension funds.
The cause for the decrease also has to do with unrealized gains on equities as well as the gains realized from profit-taking activities of Pension Fund Administrators (PFAs) in bonds and equities moderated the losses.
Findings further showed that the increase in yields persisted in January 2021 leading to further depreciation in bond prices while a moderated growth was observed in the Equity Market.
Information gathered further revealed that the losses recorded are unrealized losses from the valuation of pension assets, specifically, bond Portfolios which are marked to market in line with International Financial Reporting Standards (IFRS).
Meanwhile, PenCom has said that there is no cause for contributors of the fund to worry.
Its Director-General, Mrs. Aisha Dahir-Umar said RSA funds grew by 0.70 percent or ₦65.11 billion last January.
She said: “RSA holders, therefore, have no reason to be worried about the reported decline of pension assets. The portion affected is the Defined Benefit Funds that declined by 5.19 per cent in January 2021.
“Pension funds are long-term funds and there will always be volatility in the short-medium term, but the long-term objective is to earn fair returns on pension fund assets. Barring any exogenous shocks, the financial markets will begin stable recovery in Q2 or Q3:2021 as economic activities begin to rally towards their pre-lock down levels.”
She disclosed strategies the commission has put in place to forestall further drops in the funds.
“The Commission and industry stakeholders have adopted various strategies to diversify the Investment Portfolio of pension assets and deepen investment channels with a particular focus on pension fund investments in Infrastructure and Housing.
“The Commission is, therefore, focused on its engagements with stakeholders (Government agencies, private sector participants, multilateral development Finance organisations) in developing capital market products including infrastructure assets, housing assets, and hedging tools that meet requirements for pension fund investment,” she added.
Source: The Nation