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Nigerian Pension Funds Boost Corporate Debt Exposure as Assets up 11.6% in 2022

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Nigerian Pension Funds increased their holdings of corporate debt in 2022 as assets under management (AuM) increased by 11.6% to N14.99 trillion or $33.4 billion.

This was as yields on Government paper remained low compared to inflation.

Latest data from regulator PENCOM shows Pension fund assets invested in corporate debt securities surged by 76 percent or N717 billion between January and December 2022.

Total holdings of such securities amounted to N1.66 trillion at the end of December 2022, equivalent to 11.07 percent of total Pension assets under management.

Pension assets invested in other securities such as FGN bonds, Money Market Securities and Mutual Funds all fell as a percentage of total assets in December 2022, compared to a year earlier, the data showed.

Fund Managers are probably trying to secure better interest rates on funds invested after yields on Federal Government paper collapsed since the fourth quarter of 2019.

Pension Funds also remained underweight equities as holdings of domestic shares fell to 6.06 percent of assets in December 2022, from 6.9 percent in January 2022.

The debt capital market was active last year as rising bond yields on the back of the central bank hiking cycle magnified investor appetite for corporate bonds as they looked to diversify away from government securities.

A total of N734 billion was raised in 2022 across 19 corporate debt issuances, which represents a 35.42 percent rise from 21 issuance that summed up to N542 billion in 2021, according to a report by Chapel Hill Denham Limited.

“Given the hawkish monetary stance, and aggressive domestic borrowing by the Federal Government (FG) in 2023, we expect benchmark yields to remain range bound at the 14.50 percent and 15 percent,” said analysts at Chapel Hill Denham Limited.

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