Pension Fund Administrators (PFAs) have significantly increased their investment in Federal Government (FGN) Securities, seeing a 17.7% year-on-year rise, reaching N13.8 trillion in November 2024. This surge in investment is in response to the prevailing high interest rate environment, which has provided a lucrative opportunity for PFAs to maximize returns on safer investments.
According to the National Pension Commission (PenCom), the investment in FGN Securities climbed from N11.749 trillion in November 2023 to N13.833 trillion in November 2024. These securities include Federal Government Bonds, Treasury Bills, Agency Bonds, SUKUK Bonds, and Green Bonds.
Breaking down the figures, the investment in FGN Bonds alone saw a 6.2% increase, rising from N11.254 trillion in 2023 to N11.957 trillion in 2024. Meanwhile, investment in Treasury Bills surged dramatically by 136.6%, jumping from N243.1 billion in 2023 to N575.2 billion in 2024. On the other hand, investments in SUKUK Bonds saw a decline of 21.7%, dropping from N134.8 billion in 2023 to N105 billion in 2024.
Agency Bonds recorded a modest increase of 5.5%, reaching N10.6 billion, while Green Bonds saw a sharp decline of 97.3%, with investments falling from N106.9 billion in 2023 to just N2.9 billion in November 2024.
Analysts have pointed out that the rise in investments is a direct result of the high interest rate environment, which makes government securities more attractive due to their relatively low risk. Victor Chiazor, Head of Investment and Research at Fidelity Securities Limited, explained that the investment surge is triggered by the interest rate-friendly environment, with expectations for more growth in 2025, especially if inflation continues to rise.
David Adonri, Executive Vice Chairman at High CAP Securities Limited, echoed similar sentiments, noting that FGN Bonds are a preferred investment due to their low-risk nature, especially in a high-interest-rate environment. Tajudeen Olayinka, CEO of Wyoming Capital and Partners, also attributed the increase to heightened investor awareness and the desire to hold more stable, moderately volatile investments amidst ongoing economic challenges.
