The assets under management (AUM) of the Nigerian regulated pension industry increased by 23.8% y/y in March to N7.94trn (US$26.0bn). They are growing at a reasonable rate yet, at just 7.0% of 2017 GDP, are running well behind many emerging markets. Nigeria was relatively late (2004) in introducing legislation creating a sound structure for regulated pensions. If the industry is to come close to realizing its full potential, forward-looking leadership from the regulator and new products to extend coverage across the economy are required.
- The industry’s holdings of FGN paper amounted to 70.4% of their AUM in March, compared with 72.8% one year earlier. The beneficiary has been domestic equities, the share of which gained 2.0% over the 12-month period.
- The role of the PFAs in local debt markets remains pivotal. Their holdings of FGN bonds at end-March represented 44.3% of the stock of the instruments at end-December.
- PenCom’s latest data do not point to a surge of investment in domestic equities. The NSEASI rose by 62.7% in the 12 months to end-March while AUM in the asset class increased by 54.3% over the same period.
- The decline in yields on FGN paper since mid-2017 could lead to a change in asset allocation by PFAs. The share of AUM invested in equities has risen but we are not witnessing a sea-change.
- PenCom data as at end-December 2017 show a total of 7.89 million scheme memberships, implying an average portfolio of N950,000.
Sources: National Pension Commission (PenCom); FBNQuest Capital Research
- From the same report we see that the five largest PFAs accounted for 65% of all contributions in Q4 2017.