NATIONAL PENSION COMMISSION Promoting Economic Development in Nigeria The Nigerian Pension Industry continued to witness modest growth as Pension Assets increased markedly by 32.39 per cent from N2,554.84 billion (US$15.97 billion) as at March 2012 to N3,543.21 billion (US$22.53 billion) as at May 2013. Similarly, the number of registered contributors under the Contributory Pension Scheme (CPS) increased by 9.52 per cent over the same period. With the on-going amendment to the Pension Reform Act 2004, the CPS is poised for further growth as provisions were made for pension funds to invest in instruments that would finance long-term projects, especially in the real sector as well as create incentives for the informal sector, which is the largest employer of labour in Nigeria, to participate in the Scheme. Diversification of Pension Fund Investment In order to create a diversified investment portfolio that would meet the investment objectives of the Scheme, the Regulation on Investment of Pension Fund Assets were amended to allow Pension Funds to invest in alternative asset classes such as supranational bonds and infrastructure (Bonds and Funds). The revised pension fund portfolio is shown below: Pension Fund Portfolio as at March 2013 March 2012 March 2013 Asset Class Amount Weight Amount Weight (US$ Billion) (%) (US$ Billion) (%) Ordinary Shares 2.06 12.90 3.17 14.74 Bonds and Bills 10.19 63.81 12.85 59.77 Money Market Securities 1.80 11.27 3.32 15.44 Corporate Debt Securities 0.47 2.94 0.51 2.37 Real Estate 1.14 7.14 1.2 5.58 Supranational Bonds 0.01 0.05 Other Assets 0.31 1.94 0.44 2.05 Total Assets 15.97 100.00 21.50 100.00 The Investment Regulations were further reviewed to introduce Multiple Funds that would allow contributors to select the Fund in which their contributions should be invested subject to their risk appetite. Economic Contribution Pension Fund investments have continued to positively impact the development of the Nigerian economy. The proportion of the assets of the Funds to the GDP had successively moved from 1.47 per cent in 2006 to 7.76 per cent in 2012. Proportion of Pension Assets to GDP Indeed, the pool of funds generated under the Scheme has the potential to create a platform for the realisation of many reform initiatives in Nigeria such as in power, ports, education, telecommunication and infrastructure. In addition, deliberate policies were made for the funds to be invested in instruments that would facilitate the development of the Nigerian Capital Market. The Scheme has also contributed in increasing the depth of the insurance industry through the demand for Group Life Insurance policy for every employee, as well as the development of Life Annuities as one of the pension benefits payout options. Benefits The Scheme continues to achieve reasonable balance between risks and returns on investments on the one hand and the payment of retirement benefits on the other. Similarly, diversification through infrastructure investment provides opportunities for high yields as well as substantial and predictable returns matching the scheme's long-term liabilities. Conclusion The Commission continues to be proactive in the review of the regulation of pension fund investment in order to ensure the sustainable growth of pension assets and fair returns on investments, as well as guarantees that retirees are paid their benefits. In order to expand coverage of the Scheme, a Framework for Informal Sector Participation has been developed, which covers employees working with Small and Medium Scale Enterprises (SMSEs) and the self-employed. This will no doubt provide pension benefits to many Nigerians who currently are excluded from any pension arrangement. No. 174 Adetokunbo Ademola Crescent, PMB 5170 Wuse II, Abuja, Nigeria Telephone: +234 9 460 3930 • E-mail: info@pencom.gov.ng www.pencom.gov.ng 2006 2007 2008 2009 2010 2011 2012 7.76% 1.46% 3.95% 4.52% 6.17% 6.95% 7.51% A public institution created to regulate, supervise and ensure effective administration of pension matters in Nigeria
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