Recent data sourced from the National Pension Commission (PenCom) reveals a significant 20.6% year-on-year increase in investments in Federal Government (FG) securities, reaching N10.858 trillion in the first half of 2023 (H1’23) from N9.007 trillion in the corresponding period of 2022 (H1’22).
These securities encompass FG Bonds, Treasury Bills, Agency Bonds, and Green Bonds.
During the period between January and July of this year, the Central Bank of Nigeria’s (CBN) benchmark interest rate, known as the Monetary Policy Rate (MPR), remained in the range of 17.5% to 18.75%. The MPR plays a crucial role in anchoring interest rates throughout the money market and the broader economy.
A closer examination of the data reveals that Green Bonds exhibited the most remarkable growth at 40.3%, increasing to N96.722 billion in H1’23 from N68.949 billion in H1’22. Following closely, FGN Bonds experienced a surge of 25.2%, rising to N10.404 billion from N8.313 billion. Agency Bonds secured the third position, registering an 11.6% growth, with figures reaching N152.338 billion in H1’23 compared to N136.506 billion in H1’22.
However, Treasury Bills encountered a substantial decline of 59%, reaching N192.429 billion in H1’23 from N475.636 billion in H1’22, while Agency Bonds decreased by 12.1%, dropping to N121.54 billion from N13.825 billion in H1’22.
In response to this trend, Mr. Victor Chiazor, an analyst and Head of Investment and Research at Fidelity Securities Limited (FSL), noted that the rise in Pension Fund Administrators’ (PFAs) investments in Government Securities is attributed to the favorable interest rate environment during this period. He anticipates further increases in these investments during the second half of the year if the inflation rate continues to rise.
Mallam Garba Kurfi, an analyst and Managing Director/CEO of APT Securities and Funds Limited, highlighted the necessity of PFAs’ investments in FGN Bonds due to their low risk and ready availability when compared with other investment options. He emphasized that over N10.0 trillion in the Nigerian financial market have been invested in FGN Bonds.