Naira Devaluation: Pension funds decline by $18.9 billion in one year

Naira Devaluation: Pension funds decline by $18.9 billion in one year

The devaluation of the Naira has exerted a substantial influence on the net asset value of pension fund assets in Nigeria over the past year.

According to PENCOM data reviewed by Nairametrics, the net asset value of pension funds in US dollar terms has declined by $18.9 billion from $33.3 billion as of January 2023 to $14.4 billion as of January 2024.

As of January 2024, pension fund assets in Nigeria hit N19.53 trillion, representing a 30.3% year-on-year growth from the N14.99 trillion recorded in January 2023.

At first look, the growth reflects impressive investment strategies by pension fund managers, however, when the Naira-denominated values are converted into USD, the narrative takes a different turn.

In January 2023, with an exchange rate of approximately N450/$, the NAV of N14.99 trillion equated to around $33.3 billion. However, by January 2024, with the exchange rate depreciating to about N1357/$, the recorded NAV of N19.53 trillion declined to $14.4 billion.

Though the pension funds declined by 56.8% in USD terms within the period under consideration, it significantly outperformed the Naira, which was devalued by 201.6% within the same period.

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The performance of pension fund managers can be evaluated as quite satisfactory as the 30.3% year-on-year growth recorded in the NAV of pension fund assets as of January 2024 notably outperformed the country’s inflation rate of 29.90% as of January 2024.

Between January 2023 and January 2024, the number of Retirement Savings Accounts (RSA) increased by 3.36% from 9.89 million to 10.22 million.

January 2024 also witnessed a significant growth in the net asset value of pension fund assets, as there was an increase of N1.18 trillion from December 2024, in contrast with the N428 billion witnessed between November and December 2023.

However, despite the significant growth in Naira terms, the further devaluation of the Naira in January 2024 saw the NAV decline by $6 billion in US Dollar terms.

In December 2023, the Net Asset Value (NAV) of pension funds stood at $20.4 billion, based on an exchange rate of N899/$. However, by January 2024, it had decreased to $14.4 billion, with an exchange rate of N1357/$.

Naira Devaluation: Pension funds decline by $18.9 billion in one year