January 10, 2019

Major limits to the coverage of PFAs

The assets under management (AUM) of the regulated pension industry increased by 15.8% y/y in October to N8.45trn (US$27.5bn). They are growing at a decent rate yet, at just 7.4% of 2017 GDP, are running well behind many emerging markets. Nigeria was relatively late (2004) with its legislation creating a sound structure for regulated pensions. The South African industry dates from 1996, and its AUM represent more than 70% of GDP. The industry in Nigeria is in need of several new products and innovative leadership.

  • The industry’s holdings of FGN paper amounted to 71.7% of their AUM in October, compared with 72.1% one year earlier.
  • The role of the PFAs in local debt markets remains pivotal. Their holdings of FGN bonds at end-October represented 47.2% of the stock of the instruments at end-September.
  • The share of AUM held in domestic equities has declined over 12 months from 8.8% to 7.1%. The NSEASI fell by 11.5% over the same period. The PFAs therefore may have had some ground to cover to meet revised Pencom regulations stipulating that retirement savings account holders under the age of 49 must have at least 10% exposure to equities by end-2018. We understand that holdings in mutual funds are allowable to meet this new threshold.
  • The latest PenCom data show a total of 8.41 million scheme memberships, implying an average portfolio of N1.00m (slightly down on September).
AUM of PFAs, Oct 2018 (% shares) Total: N8.45trn

Sources: National Pension Commission (PenCom); FBNQuest Capital Research
  • From 01 January the PFAs have been able to market micro pensions for the self-employed and employees of small firms. Investors will be able to withdraw up to 40% of their contributions before their retirement.