Market News

By Omobola Tolu-Kusimo

Rising inflation at 33.5 per cent eroded pension asset values and retirees’ purchasing power last year, The Nation has learnt.

Similarly, continued naira depreciation during the year under review undermined foreign investment returns and increased operational costs even as employer defaults persisted, threatening scheme stability and necessitating stronger enforcement on the pension fund assets which stood at N22.51 trillion during the period under review.

These among others were cited by the newspaper in the National Pension Commission (PenCom) Fourth-Quarter 2023 Report as the macroeconomic risks and sectoral challenges that faced the country’s pension fund assets as at Quarter Four, 2024.

Additionally, PenCom stated that the uneven implementation of the Contributory Pension Scheme (CPS) across States continues to limit nationwide coverage and inclusivity.

Disclosing strategic priorities, the commission said to address emerging risks and strengthen the pension system, key priorities were outlined for Quarter One, 2025.

These include intensifying enforcement and recovery efforts, expanding the Micro Pension Plan through increased awareness and simplified enrolment, and enhancing data integrity and transparency.

The Commission said: “It also intends to provide targeted support to States implementing the CPS, while offering supervisory guidance (where necessary) to PFAs in adjusting investment strategies to mitigate inflation and currency risks. These efforts reinforce the Commission’s unwavering commitment to protecting pension assets, broadening coverage, and fostering a resilient, transparent, and inclusive pension system.

“The Nigerian pension industry continued on a growth trajectory in Q4 2024, reflecting sustained stakeholder confidence, increased compliance, and expanding coverage across formal and informal sectors. During the quarter, Retirement Savings Account (RSA) registrations grew to 10.58 million, with 84,495 new enrolees, reinforcing the relevance of the Contributory Pension Scheme (CPS) as a dependable vehicle for retirement planning.

“The industry’s financial strength was further demonstrated by a N1.13 trillion increase in the Net Asset Value (NAV) of pension fund assets, which rose from N21.38 trillion in Q3 to N22.51 trillion in Q4 2024. This was largely driven by increased pension contributions, improved capital market conditions, and higher investment income across key asset classes.

“Progress was also recorded in deepening financial inclusion through the Micro Pension Plan (MPP). A total of 8,905 new contributors were onboarded, raising total enrolment to 172,936, with contributions of N89.38 million received and N17.36 million paid out in contingent withdrawals during the period. Pension contributions remained strong, amounting to N342.22 billion for the quarter, with the Public Sector contributing N174.77 billion and the Private Sector N167.45 billion, indicating broad-based commitment to retirement funding obligations,” PenCom stated.

On compliance, the Commission said a total of 2,530 Pension Clearance Certificates (PCCs) were issued and recovered N407.97 million from 30 defaulting employers. Legal action was initiated against eight employers, highlighting the Commission’s intensified enforcement efforts to protect pension rights.

“Despite these gains, the sector faced macroeconomic headwinds. Inflation rose sharply to 33.5per cent, adversely affecting the real value of pension assets and threatening the adequacy of retirement benefits. Similarly, continued naira depreciation and currency volatility disrupted investment planning and returns on foreign-denominated assets. Employer defaults and non-uniform CPS implementation across States also posed challenges to nationwide coverage and scheme sustainability.

“Looking ahead, the Commission remains focused on strategic interventions to enhance sector resilience and integrity. Key priorities for Q1 2025 include strengthening compliance enforcement, accelerating MPP growth, improving data quality and reporting transparency, deepening engagement with non-compliant States, and guiding Pension Fund Administrators (PFAs) on responsive investment strategies that mitigate inflationary and currency risks. The Commission remains committed to fostering a secure, inclusive, and sustainable industry that delivers value to contributors and retirees, even in the face of macroeconomic uncertainty,” the Commission said.