Nigeria’s pension fund industry commenced 2025 on a robust note, registering a substantial growth of N349.25 billion in January, propelling the total net asset value (NAV) to N22.86 trillion. This 1.54% increase from December 2024’s N22.51 trillion reflects the industry’s continued upward trajectory and underscores its increasing importance within the Nigerian financial landscape. This impressive growth represents a significant year-on-year increase of N3.33 trillion, or 17.05%, compared to the N19.53 trillion recorded in January 2024. The industry’s positive performance can be attributed to several factors, including robust investment returns across various asset classes, consistent contributions from both employees and employers, and the overall growth of the Nigerian economy. The rising NAV demonstrates the effectiveness of the Contributory Pension Scheme (CPS) in accumulating retirement savings for Nigerian workers.
The growth in the pension fund industry is further substantiated by the increase in Retirement Savings Accounts (RSAs). The number of RSAs reached 10,615,028 by January 2025, indicating an expanding contributor base and highlighting the growing trust and participation in the CPS. This growth in membership contributes directly to the increasing pool of pension funds, further fueling the industry’s overall expansion. The report, encompassing approved existing schemes, closed Pension Fund Administrators (PFAs), and RSAs, including unremitted contributions at the Central Bank of Nigeria and legacy funds, paints a picture of a thriving and dynamic pension landscape.
A deeper dive into the investment portfolio reveals a strategic allocation across various asset classes. Domestic ordinary shares constituted a significant portion of the investments, reaching N2.41 trillion by January 2025. This emphasizes the importance of the local equities market as a key investment avenue for pension funds. Federal Government Securities (FGN), a traditionally favored asset class for its relative safety and stable returns, held a dominant position in the portfolio, totaling N14.31 trillion. This includes various federal government bonds and treasury bills. Other significant asset classes include money market instruments valued at N2.18 trillion and corporate debt securities at N2.27 trillion. The allocation to mutual funds also saw an increase to N93.22 billion from N80.78 billion in December 2024, indicating a growing interest in diversified investment vehicles.
The industry’s impressive growth is a collective result of performance across diverse pension fund types, including existing schemes, CPFAs, and the various RSA funds (Funds I through VI), as well as the Retiree Fund VI. This diversified approach to asset allocation helps mitigate risks and optimize returns, contributing to the overall health and sustainability of the pension system. The consistent growth across these different fund types underscores the effectiveness of the regulatory framework and the diligent management by the PFAs.
Despite the commendable progress, the National Pension Commission (PenCom) continues to advocate for broader adoption of the CPS across all states. As of December 2024, only 11 states, along with the Federal Capital Territory, had implemented the scheme. PenCom emphasizes the importance of the CPS in securing the financial future of retirees and urges the remaining states to enact the necessary legislation and commence implementation. This expansion will further broaden the reach of the pension system and ensure that more Nigerians benefit from its provisions.
The Pension Reform Act of 2004 laid the foundation for the modern pension system in Nigeria, replacing the defined benefit scheme with the CPS. This new system, based on joint contributions from employers and employees, addresses the inherent challenges of the previous system and fosters a more sustainable and robust framework. The consistent growth witnessed in the pension fund industry is a testament to the effectiveness of the reforms introduced by the 2004 Act. The Act has not only improved the financial security of retirees but has also contributed significantly to the development of the Nigerian capital market. The continued expansion of the CPS and the proactive regulatory oversight by PenCom are crucial for ensuring the long-term stability and growth of the pension industry and its contribution to the overall Nigerian economy.
