Rising Inflation, Low Yield On Fixed Income Securities Threaten Growth Of Pension Fund Asset – LCCI

The Director General, Lagos Chambers of Commerce and Industry, Muda Yusuf, has decried the poor yield on fixed-income securities as well as rising inflation rate, saying that these could tnreaten the real growth of pension funds assets in the medium term.

The DG, said this at the 2020 annual national conference of the National Association of Insurance and Pension Correspondents with theme “Promoting Bankable Investments Portfolio for Insurance and Pension Sectors.”

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Nigeria’s inflation rate has seen another jump to 13.71 per cent in September as increase in food- prices continue to worsen

The 13.71 per cent inflation recorded in September is the highest increase so far recorded in the last 32 months.

The last time Nigeria’s inflation rate was as high as 13.71 per cent was in February 2018 when the index rose by 14.33 per cent

The LCCI DG advocated the need to de-risk the real sector, to attract more investment opportunities.

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He explained that the National Pension Commission mandates PFAs to invest pension funds in low-risk securities, adding that fund managers have little exposure to volatile investment vehicles.

He said, “Fund managers’ exposure to investment vehicles in the real sector, is extremely low due to the high level of risk involved, just two percent of pension assets is invested in real estate, and less than one percent in infrastructure fund.

“This is because fund managers often complain that projects in the real economy are non-bankable.”

Speaking further, he said that there is need to maintain a balance between liquidity and returns on investment on bank placements, Treasury Bills, Commercial papers, Bonds, Equities and Real Estate.

“Pension fund assets have been on the upward trajectory in the last three years with assets under Management rising by 42.9 per cent from N7.94trn as of March 2018 to N11.35trn as of August 2020.

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“This year, pension funds assets appreciated by 8.8 per cent to N11.35trn at end-August 2020 from N10.43trn at end-January 2020 amid very low return rates on government securities,” he added.

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