Nigerian pension asset under management surges 20% to $30bn

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Data from the Pension industry regulator, PenCom shows that the total assets under management (AUM) of the regulated pension industry increased by 20.3% y/y to NGN12.29trn (USD30.0bn) at the end of 2020.

There was no noticeable movement in December.

According to a report by analysts at FBNQuest, the asset mix remains heavily concentrated in FGN securities which accounts for 66.2% of the total.

A comparison with Kenya, a peer country where total asset under management climbed to USD12.4bn by June 2020, there was sizeable exposure to immovable property (18.6%) and listed equities (14.2%) alongside the largest share in government securities of only 44.0%.

According to FBNQuest analysts, “fund managers in Nigeria will have their reasons for paying limited attention to assets such as real estate, private equity and infrastructure funds.

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“The corporate debt market has grown in recent months from a small base with some high-profile new issues with holdings rising by 47.4% y/y to NGN836bn in December.”

The analysts said holdings of FGN paper are predominantly the bonds, which represented 55.6% of total pension asset under management.

Over the 12 months, the share of NTBs has collapsed from 18.4% to 5.1% as the returns have tanked. The initial trigger was the CBN circular of October 2019 that excluded domestic nonbank players (notably the PFAs) from the market in its OMO bills.

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The yields on the FGN bonds have now risen by about four percentage points in mid-curve since the start of the year. That said, they are still well under water when you allow for headline inflation running over 16% y/y.

One notable development relates to the share of domestic equities which has risen from 5.4% to 7.0% over the twelve months, and members’ holdings by 55.2% to NGN858bn.

Over the same period the all-share index increased by 50.0%, which offers some limited evidence for the theory that the surge on the stock market in Q4 ’20 was driven by changes in asset allocation by domestic investors.

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There are a number of other key highlights in the analyst report.

They include the observation “that retail players account for more than 40% of domestic investor transactions on the NSE. Domestic institutions other than the PFAs may well have also made similar shifts in their asset allocation.

“The average value of a retirement savings account (RSA) at end-December was NGN1.02m, unchanged from the previous month.

“Just NGN81m was invested at end-December in the newest RSA fund (no V), which has been created for micro pensions. The fund has been in operation since January ’20 and could become a game changer if the industry finds the best marketing strategy. “

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