PFAs Shift Focus To Treasury Bills, Invest N193bn


The recent hike in the monetary policy rate (MPR) by 600 basis points so far in the current year to 24.75 percent, is rubbing off positively on yields across various investment windows, especially, Treasury Bills(TBs), LEADERSHIP can exclusively reveal.

Investigation shows that the hike, a step taken by the Central Bank of Nigeria (CBN) to mop up liquidity to cut down inflation rate, has seen yields in treasury bills rise, thereby, attracting N193 billion, from the N19.66 trillion pension fund assets, between January and March, 2024.

T-Bills are short-term government-backed securities issued by the CBN. They are issued when the government requires a short-term loan of funds. They can reach maturity in 364 days. T-Bills are sold at a price lower than their face value.

Market observers noted that the yields on 3-month T-bills have reached 16.52 per cent, while the yields on 12-month T-bills have climbed to 24.91 per cent, which heightened yields serve as a compelling incentive for pension funds to channel more capital into T-bills, as they seek to optimise returns.

The FGN Bond and Treasury Bills markets recorded a significant yield rise in 2024, as the average yield in the FGN Bond market increased from 14.13 percent on the first trading day of the year to 19.29 percent as at March 26, 2024.

The CBN issues Treasury Bills twice a month to help the Federal Government fund its budget deficit, support banks in managing liquidity in the system and curb inflation.

Following this, the  apex bank had, last month, disclosed it will issue N1.64 trillion treasury bills in the second quarter of 2024 as the same amount will be maturing between March and May, this year.

A breakdown of the Treasury Bills programme to be issued in the next two months, which represents the amount that would mature during the same period, consists of a total of N414.29 billion for 91-day tenor, N43.75 billion for 182-day tenor and N1.18 trillion for 364-day tenors.

Data sourced by LEADERSHIP from the National Pension Commission (PenCom) shows that, while Pension Fund Administrators (PFAs) invested N214.5 billion in Treasury Bills as at December, 2023, there was about N7 billion rise in January 2024 to N221.8 billion.

February 2024 saw a moderate leap of additional N64 billion, thereby, bringing the total amount of investment in treasury bills to N285 billion in the second month of the current year.

However, March 2024 recorded a huge jump by about N115 billion to N407.6 billion as at the end of the first quarter, 2024, translating to a cumulative N193 billion that TBs attracted from the pension fund between the end of 2023 and March, 2024.

By the time data for April and May, 2024 comes out, there are insinuations that more pension fund will find its haven in treasury bills in April and May, 2024 as the apex bank kickstarts another round of auctions of N1.64 trillion treasury bills in this second quarter of 2024.

Corroborating this development in an exclusive interaction with LEADERSHIP at the weekend, the executive secretary/CEO, Pension Fund Operators Association of Nigeria (PenOp), Oguche Aguda said, as t-bills are open to all investors, PFAs are allowed to participate in their sale, adding that, the attraction to t-bills currently is purely because of the rate/yield on offer.

According to him, “They are not currently attractive to only PFAs but all types of investors who see them as a low-hanging fruit to earn good returns. Pension funds have always invested some level of the assets under management in t-bills but the current rate on offer makes them more attractive than usual. They are also as safe as Federal Government Bonds as the same entity offers them.”

Noting that the hike in rates offered on t-bills are an effort by the apex bank to mop up liquidity to reduce inflation as CBN are actively trying to court every type of investor, even retail ones, he added that, “Treasury Bills (t-bills) are the sale of short-term government bonds to the general public(both institutional and retail investors). T-bills are auctioned through the Debt Management Office (DMO) to what we call Primary Dealer Market Maker (PDMM).

“The PDMMs are just vehicles through which these treasury bills can reach the public(both institutional and retail). The way the regulation is set up, only commercial banks (and just a few of them) can be PDMMs.”

Clarifying insinuation that PFAs may be trading in Open Market Operations (OMO) of the CBN, he said: “We need to clarify that Treasury Bill Auctions are not considered Open Market Operations (OMO) by the Central Bank of Nigeria. OMO are the buying and selling of securities in the open market to commercial banks and strictly to commercial banks. An example would be Repurchase Agreements or Repo. 

“As t-bills are open to all investors, PFAs are allowed to participate in their sale, unlike OMO which is restricted to only commercial banks.”

The vice chairman, Highcap Securities, David Adonri, stated that, public debt constitutes the major portfolio of financial assets held by PFAs as they always want to maximise their returns in the debt market.  

From January 2024, he said, it appeared that the Central Bank of Nigeria (CBN) adopted Open Market Operation (OMO) as a monetary tool to rein in inflation, hence, the apex bank sold a lot of Treasury Bills(TBs) at a very high discount rate, which elicited the influx of funds from PFAs to that space.

Earlier, the director general, PenCom, Mrs. Aisha Dahir-Umar, said, the CPS has been very impactful in Nigeria since the commencement of its implementation in 2004.

To this end, she added that the formation of long term domestic capital, represented by the huge value of pension assets, belonging to over 10 million contributors, is slowly, but surely, changing Nigeria’s financial landscape. 

This, by extension, she stressed, is also transforming the course and pace of socio-economic development in the country.


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