Resilience of the PFAs

Conventional wisdom has it that the growth of inflows into the PFAs has slowed on account of arrears in contributions by government. Data on assets under management (AUM) from Pencom and on membership numbers, drawn from the same source but published by the National Bureau of Statistics, show that the damage could have been worse. AUM increased by 11.4% y/y to N5.10trn in September 2015 and by a further 16.9% y/y to N5.96trn one year later. Before the start of the oil price slide in Q3 2014, the annual growth of AUM was said to be about 20%.
Total membership, of which retirement savings accounts (RSAs) represent 99%, rose by 7.6% y/y to 6.81 million in September 2015 and then by 7.3% y/y to 7.31 million in September 2016. 

The private sector supplied 670,000 of the increase in membership over the two years, the federal government 100,000 and the states 121,000. Government employees remain members even if their employer does not make their pension contributions, of which there was plenty of anecdotal evidence in 2015. The interesting point in our view is that government has continued to add employees to its schemes. 

Sadly, there are no industry comparisons of the PFAs by investment performance. We can say, however, thanks to some elementary arithmetic that the average value of a RSA increased from N724,000 in September 2014 to N749,000 one year later and N815,000 in September 2016.  

The PFAs have become the anchor buyers at the monthly DMO auctions of FGN bonds to finance the budget deficit. Indeed their holdings of these instruments rose by 11 percentage points to 58.7% of their AUM in the two years to September, and we trust that the very low total bid in November was a one-off (Good Morning Nigeria, 29 November 2016).

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