IOCs’ Pension Managers Boost Offshore Investments Amid Naira Depreciation
Safeguarding Pension Funds Amid Economic Uncertainty
In light of recent currency instability and the depreciation of the Nigerian Naira, pension fund managers affiliated with international oil companies (IOCs) are taking proactive steps to secure their assets. These Closed Pension Fund Administrators (CPFAs) have increasingly turned to foreign money market instruments, aiming to mitigate risks and ensure stability.
According to the latest report from the National Pension Commission (PenCom), CPFAs allocated N107.1 billion to foreign money market instruments in May 2024, marking a significant increase from N97.2 billion in April 2024. Additionally, their investment in foreign ordinary shares rose by 9.3% to N268.7 billion during the same period.
Overall, Nigeria’s total pension fund assets saw a modest growth of 2.02%, reaching N20.2 trillion in May 2024, up from N19.8 trillion in April.
The pension industry in Nigeria comprises 19 Pension Fund Administrators (PFAs) and five CPFAs, with three CPFAs specifically linked to IOCs such as Agip CPFA Limited, Shell Nig. CPFA Ltd, and TotalEnergies EP Nigeria CPFA Limited. These IOCs-affiliated CPFAs are uniquely authorized under current regulations to invest offshore, unlike local PFAs and the remaining CPFAs.
Amid calls for regulatory amendments by the Pension Fund Operators Association of Nigeria (PenOp), there is a growing advocacy to expand offshore investment opportunities for all PFAs. This proposed amendment aims to safeguard pension funds against inflation and currency devaluation, which can potentially erode retirees’ savings and contribute to old-age poverty.
Mr. Dave Uduanu, a member of PenOp and Managing Director of Access Pensions, emphasized the need to diversify investment portfolios internationally, particularly in a context where the domestic economy remains vulnerable to external currency fluctuations.
As stakeholders await legislative action to broaden investment horizons for pension funds, the discussion underscores the critical balance between safeguarding assets and optimizing returns in an evolving economic landscape. The outcome of these deliberations will shape the future resilience of Nigeria’s pension industry amidst global economic uncertainties.
Fox Nigeria
