Naira depreciation: Pension funds fall by $6bn

The value of the pension fund in dollar terms has showed a decline by 29 per cent to $14.39bn in January 2024 compared to $20.41bn in December 2023.

The January unaudited report on the pension funds industry portfolio noted that the value of the pension fund was converted at the rate of N1,356.88/$ in January from N899.39/$ in December, leading to the decline.

In naira terms, the total assets under the Contributory Pension Scheme has increased to N19.53tn from N18.36tn at the end of 2023, according to data from the National Pension Commission.

The report further indicated that N12.14tn of the value of the assets was invested in Federal Government securities, higher than N11.92tn from the previous month.

Earlier this month, an allegations was denied by the Director General of the National Pension Commission, Aisha Dahir-Umar, that the commission loaned N10tn to the Federal Government.

Dahir-Umar pointed out that PenCom was not a bank and did not warehouse or manage pension funds, adding that the Federal Government did not obtain a N10tn loan from the commission.

According to her, “Investments by the PFAs in the securities of the Federal Government of Nigeria are not loans as erroneously portrayed, but investments in securities, through bonds and treasury bills, as approved by the relevant government agencies, in this case, the Debt Management Office and Securities and Exchange Commission. They are traded on authorised capital markets. That is, the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.”

In a previous chat with a correspondent, the Head of the Corporate Communications Department, PenCom, Abdulqadir Dahiru, stressed that the depreciation of local currency affected not only pension funds but had a wider effect on the economy.

While speaking on what the commission was doing to hedge against the microeconomic headwinds, he noted, “Naira devaluation did not just affect pension funds; it affected everybody, and it is a twin thing. You have inflation and you have devaluation.

“So, anybody who has money in the bank can tell you what inflation has done to his money. It reduces the value of the currency because then you need more of that currency to buy the same amount of the goods and services.”

Dahiru also explained that pension funds have an advantage in that they are invested in many instruments.