The assets under management (AUM) of the Nigerian pension industry increased by 15.3% y/y to N6.02trn (US$19.7bn) in November, according to the regulator Pencom. We view the increase as creditable when we make allowances for the arrears in contributions by some state governments and public agencies. The breakdown by asset class shows no substantial change: the share of FGN securities (bonds and NTBs) rose from 66.5% to 71.3% of the total over the period while that of domestic equities narrowed from 10.0% to 8.0%.
Fund managers do not like telling retail investors, who numbered more than 7.3 million at end-September, that the value of their portfolios has fallen over the last month. This would have been the message for much of the past three years if equities had dominated their portfolios. The NSEASI fell for three successive years (2014-16).
The PFAs have become the anchor buyers at the monthly auctions of FGN bonds to finance the budget deficit. The DMO was able to compensate for an unsuccessful auction in December with a very different outcome last month: it sought to raise N130bn but collected N215bn, albeit by setting the stop rates at close to 17.00% for all three instruments on offer.
Sadly, there are no industry comparisons of the PFAs by performance.
Sources: National Bureau of Statistics (NBS); FBNQuest Research
We should flag a trend whereby officials have come to view the funds managed by the pension industry as a remedy to help cure Nigeria’s huge infrastructural deficit. At least one federal government minister and a former head of state have gone down this route. The Pencom data show infrastructural fund holdings at just N2.2bn in November. Increases on an entirely voluntary basis would be welcome.