Investments by Pension Fund Administrators, PFAs, in commercial papers recorded steady decline in the last five years, dropping by 10.3 per cent to N175 billion in November 2024 from N195 billion recorded in November 2020.
According to data released by the Pension Fund Operators Association of Nigeria, PenOp, on its instagram handle, PFAs investment in commercial papers only witnessed a positive turnaround in 2023 with investment hitting N291 billion.
Further breakdown shows that in 2020, PFAs invested N195 billion in commercial papers. The figure declined by 140.7 per cent to N81 billion in 2021. In 2022, the figure further declined by 12.3 per cent to N71 billion, only for it to rise by 309.9 per cent to N291 billion in 2023.
However, the figure reversed the positive climb recorded in 2023 to decline by 39.9 per cent to N175 billion in 2024.
According to PenOp, pension funds invest in commercial papers because they offer attractive returns and their short-term horizon reduces the risk of long-term exposure.
PenOp stated: “On the 20th of January, the National Pension Commission, PenCom, released new regulations governing commercial papers. Stating that commercial papers that were not backed by a sovereign, a Multilateral Development Finance Organisation (MDFO) or a commercial bank with a minimum credit rating of ‘A’.
One of the ways private companies’ access short-term capital is through commercial papers. Commercial papers are short-term debt instruments usually between 90-270 days that private companies issue to meet operational or capital needs.
“Pension funds invest in commercial papers because they offer attractive returns and their short-term horizon reduces the risk of long-term exposure. As of November 2024, pension fund assets invested in commercial papers was recorded at N175bn down from N291bn at the same period the year before.”
