Nigeria’s mutual fund assets near N10 trillion as money market funds dominate

Nigeria's collective investment schemes now hold about N9.9 trillion, close to the N10 trillion mark, and money market funds account for most of it. Money market funds hold N6.72 trillion, or 67.96 percent of net asset value, according to Nairametrics' analysis of SEC data. Dollar funds hold a further N1.75 trillion. Together, the two categories make up about 85.7 percent of industry assets. Stanbic IBTC Money Market Fund is the largest single fund, with N3.13 trillion under management. The growth reflects investors who want liquid, relatively stable returns in an environment of high interest rates. It also raises questions about concentration, fund yields and how much of Nigeria's savings now sits in short-term instruments. This article looks at what the figures show and what they do not.

Contents

• How big the industry has grown
• Why money market funds dominate
• The dollar fund segment
• The largest funds
• Yields and what they mean
• What to watch

How big the industry has grown

Nigeria's mutual fund industry has expanded quickly this year. According to SEC data reported by Nairametrics, total net asset value reached N9.885 trillion in the latest reporting period, up from about N9.66 trillion at the end of September and N8.44 trillion in March. The growth has been steady rather than sudden, with each monthly report showing a modest increase.

The industry's size should be read against the wider financial system. Mutual funds are one of several places where Nigerians hold savings, alongside bank deposits, government securities and equities. The figures show that a large and growing share of savings is being placed in pooled vehicles managed by investment firms.

Why money market funds dominate

Money market funds invest in short-term instruments, such as Treasury bills, commercial paper and bank deposits. They offer daily or near-daily access to money, and their returns track short-term rates. For investors who want to keep cash available while earning a reasonable return, that combination has made them the default choice.

The category has grown in both assets and investors. Nairametrics reported that money market funds held N6.44 trillion in late September, serving more than 878,000 unitholders. The number of funds in the category has also increased, to 49 in the latest ranking. That expansion means investors have more choices, but it also means the category is becoming more crowded.

The dollar fund segment

Dollar funds hold N1.75 trillion, about 17.7 percent of industry assets. Their growth is a reminder that many investors and businesses want to hold foreign-currency returns, or protect themselves from currency movements. The dollar segment's returns depend on dollar yields and on the naira exchange rate, so investors should look at both when comparing the segment with naira funds.

The largest funds

The concentration of assets in a few large funds is one of the most important features of the data. Stanbic IBTC Money Market Fund is the largest fund in Nigeria, with a net asset value of N3.126 trillion. Guaranty Trust Money Market Fund holds about N677 billion. Those two funds alone account for a significant share of the category.

Large funds bring benefits, such as scale and operational resilience. They can also mean that a single fund's allocation decisions matter more to the market than the headline number of funds suggests. Investors should look at the fund's holdings, maturity profile and liquidity arrangements, not just its size.

Yields and what they mean

Nairametrics' rankings show that top money market funds reported year-to-date yields of roughly 19 to 21 percent in the September ranking, with First Ally, Coronation and DLM among the leaders. Those figures are annualised returns over the reporting period, after fees, and they change with the market. They are not guarantees of future returns.

Yields are an important point of comparison, but they are not the whole story. A high yield can reflect the fund's holdings, its fee structure or conditions in the market at the time. Investors should check how a fund's yield has been achieved over time and whether it relies on instruments that carry more risk.

What to watch

Three things will show how this market develops. The first is the direction of interest rates. Money market fund yields usually follow short-term rates, so a change in policy or in the cost of government borrowing will affect returns quickly. The second is concentration: whether the largest funds keep growing and what that means for liquidity during periods of stress. The third is the role of new products, such as the National Savings Scheme that the SEC has introduced to widen participation in the capital market, which could bring new investors into the category.

Investors should compare funds on net yield, fees, liquidity terms and the quality of their holdings before deciding. The data show where most investors have chosen to place their money, but they do not show whether that choice suits every investor's goals.

This article is general information, not personal financial advice. Check the fund's latest factsheet and the SEC's published data before making a decision.