The assets under management (AUM) of the regulated pension industry increased by 14.9% y/y in December to N8.64trn (US$28.1bn) and by 1.6% m/m. They are growing at a healthy rate yet, at just 6.8% of 2018 GDP, are running well behind many peer 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 comparable GDP. The industry in Nigeria has a need of new products.
The industry’s holdings of FGN paper amounted to 73.1% of their AUM in December, compared with 70.4% one year earlier.
The stake of the PFAs in naira debt markets remains pivotal. Their holdings of FGN bonds at end-December represented 49.2% of the stock of the instruments at end-September.
The share of AUM invested in domestic equities has declined over 12 months from 8.9% to 7.0%. The NSEASI fell by 17.8% over the same period. We understand that the regulator has lifted the requirement for retirement savings account holders under a set age to hold a minimum exposure to equities, and thereby eased the pressure on the PFAs to invest in an asset class with which they are not always comfortable.
The latest PenCom data show a total of 8.41 million scheme memberships, implying an average portfolio of N1.03m (slightly higher than November).
AUM of PFAs, Dec 2018 (% shares) Total: N8.64trn
Sources: National Pension Commission (PenCom); FBNQuest Capital Research
This average should decline because from 01 January the PFAs have been able to market micro pensions for the self-employed and employees of small firms. The regulator has suggested an increase in AUM over an unspecified timeframe of N3trn.