•Analysts say high interest rate responsible

By Peter Egwuatu

Indications have emerged that the relatively high interest rate pervading the financial market in the last six months has triggered higher investment in the Federal Government (FG) securities by Pension Fund Administrators, PFAs.

Available data from the National Pension Commission, PenCom, shows that the investment in FG securities went up 20.6% Year-on-Year, YoY, to N10.858 trillion in the first half of 2023, H1’23, from N9.007 trillion in the corresponding period of 2022, HI’22.

The securities include: FG Bonds, Treasury Bills, Agency Bonds, and Green Bonds.

The Central Bank of Nigeria, CBN’s Monetary Policy Rate, MPR, has hovered around 17.5 % and 18.75% between January and July this year.

MPR is the benchmark interest rate of the CBN which anchors all other interest rates in the money market and the economy.

Meanwhile, analysis showed that the Green Bonds recorded the highest growth at 40.3 % to N96.722 billion in H1’23 from N68.949 billion in H1’22. It was followed by FGN Bonds which surged by 25.2 %   to N10.404 billion from N8.313 billion. Agency Bonds came third recording 11.6 % growth to N152.338 billion in H1’23 from N136.506 billion in H1’22.

However, Treasury Bills recorded a decline of 59 % to N192.429 billion in H1’23 from N475.636 billion in H1’22 while Agency Bonds down by 12.1 % to N12154 billion from N13.825 billion in H1’22

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Reacting to this development, analyst and Head of Investment and Research at Fidelity Securities Limited, FSL, Mr Victor Chiazor, said: “The rise in PFAs’ investments in Government Securities is triggered by the interest friendly rate environment during this period.

“More of this investment is expected to be increased in the second half of the year as we get closer to the 2023 if inflation rate continues to increase.”

In his own part, analyst and Managing Director/CEO of APT Securities and Funds Limited, Mallam Garba Kurfi, said: “The Investment in FGN Bonds by PFAs is necessary because of its low risk and availability when compared with the other investment; more than N10.0 trillion in the Nigerian financial market were invested into FGN Bonds”.