Nigerian Pension Industry: You should NOT mark your own investment performance examination papers

In a document released on 11 April 2024, the Nigerian pension industry has taken the reins of its own performance reporting with the release of PenOp’s ‘Inaugural Performance Report’, titled ‘Uniform Performance Reporting. Full Year 2023’.

PenOp (Pension Operators of Nigeria) is the trade association and umbrella body of all licensed pension fund operators in Nigeria (made up of all Pension Fund Administrators (PFAs), Closed Pension Fund Administrators (CPFAs) and Pension Fund Custodians (PFCs)).

PenOp’s report started as follows:

“Why Is PenOp Releasing The Uniform Performance Report?

  • Up until now, reporting has been left up to external parties who report performance figures without the context that is required.
  • PenOp has taken up the responsibility to report performance in a way that is fair to all pension funds and provides much needed context to the public in a way that allows them to make informed decisions.”

While this initiative aims to enhance transparency and provide context to stakeholders, it also raises pertinent questions regarding independence, transparency, and accountability as well as amounts to the PFAs, via PenOp marking its own examination papers. This should not be so in such an important industry in Nigeria for Nigerians.

Missing information

Over the last number of years, there have been efforts by well-meaning professionals and independents to independently evaluate and make available to the public, for who the PFAs manage funds, the performance of pension funds, but they have continuously faced numerous challenges in getting the required data and information, most notably fund prices and fund asset allocation. This stems from missing data, incomplete data, no data, gaps in data or just no publication of the data.

Regulatory Mandates vs. Industry Practice

Now, for context, PenCom, the industry regulator, mandates PFAs through published rules, circulars and guidelines, to make public on their websites, information and data relating to the funds.

These include, at a minimum, the last 7 days’ fund prices, the last 7 days asset allocation for each fund, as well as annual audited corporate and fund accounts, which should include the audited fund unit price. In practice though, the lack of data and in some cases, the accuracy of the data is glaring.

Benchmarking for Transparency

In December 2023, PenCom released a circular introducing performance measurement benchmarks for Assets in Funds Managed by PFAs and CPFAs. The focal point of the circular was the establishment of benchmarks against which pension fund asset performance is measured. Each asset class is now assigned a specific benchmark, offering a standardised metric for performance evaluation. The benchmark details are as follows:

PenOp 1

However, with the release of the report by PenOp wherein they made public the asset class allocation weights included in the indices, we have noticed divergences between the now industry benchmarks and PenCom guidelines which raise concerns about fairness, potentially skewing performance assessments in favour of PFAs rather than work harder for RSA holders.

For example, from PenCom’s guidelines, Fund I can have ‘Exposure to Variable Income Instruments of up to 75%’ but the asset allocation weights used for the Fund I benchmark by PenOp allocates only 21% to variable income instruments. This short-changes and defeats the essence of why Fund I was set up if 79% of assets are ‘guided’ to be invested in non-variable income instruments, in essence, fixed income instruments. For Fund II, the guidelines allow ‘Exposure to Variable Income Instruments’ up to 55%, the index weights are set at 17% and so on (see table below).

PenOp 2

The overall observation is that the asset allocation weights in the indices is giving an easy ride to the PFAs, who can then turn around to claim they are performing well by outperforming the respective benchmark indices. You just need to review the report and see how funds have outperformed their respective indices, especially Funds III, IV, V and VI. (see charts below). The PenOp report is available here.

Implications for RSA holders

Transparency in reporting is crucial for the millions of Nigerians whose retirement savings are directly impacted by pension fund performance, more so the independence of that reporting. Even slight underperformance can significantly diminish future pension benefits, highlighting the importance of accessible and accurate performance-related information.

For example, if the investment performance of a fund underperforms average returns by just 0.25% per month, say over 15 years, the fund would be worse off by about 32% compared to the average fund. See illustration below:

PenOp 3
NB: figures are for illustration purposes only.


While the release of PenOp’s inaugural performance report is admirable, we implore PenOp to ensure that all data and information be made available in the public domain as specified by PenCom to allow independent analysis, calculations, and comparisons. By ensuring that all PFA’s publish fund prices daily on their websites as well as detailed asset allocation and other information, the industry will continue to take bold steps towards transparency.

There is continued need for greater transparency, accountability, and independence in performance reporting. With this the PFAs will be fulfilling an obligation to RSA holders by ensuring transparent and timely disclosures. After all, the industry’s primary responsibility is to safeguard the interests of the millions of Nigerian pensioners they manage funds for, not to mark its own examination papers.

PenOp Fund 1

PenOp fund 2

PenOp Fund 3

PenOp fund 4

PenOp Fund 5

PenOp Fund 6

This article was written by Michael Oyebola. You can access a copy of the PenOp investment performance report here.

Michael Oyebola is the founder of The platform is an independent research and information website that offers data and qualitative information about Nigerian Mutual and Pension Funds.

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