Continuing Revival by the PFAs


Tuesday, September 26, 2017/11:16 PM/ FBNCapital Research

The assets under management (AUM) of the regulated Nigerian pension industry increased by 20.6% y/y in May to N6.73trn (US$22.0bn). This is a decent annual increase when we allow for the arrears in pension (and salary) payments to employees of state governments and public agencies. The FGN’s several initiatives to bolster state government finances including the refund of Paris and London Club overpayments have made an impact. It is clear, however, from reprimands delivered by the FGN that not all states have cleared the mountain of arrears.

Holdings of FGN paper amounted to 73.1% of AUM in May, compared with 67.9% one year earlier. Data from the DMO highlight the bid at auction from the PFAs for the long bonds, which they favour for matching purposes. We can see a sharp rise in positions in NTBs, to 16.7% of AUM from 8.5%.

We see this steep rise as the PFAs’ belated recognition that they had been missing out on the stop rates of more than 22% that the CBN was setting at the time at its primary auctions and open market operations (OMO).

PenCom’s latest data capture only the very start of the surge on the stock market, driven by new money from offshore investors. The share of domestic equities in AUM actually declined to 8.0% in May from 9.5% one year earlier.

Subsequent monthlies from PenCom will reflect this surge on the stock market since mid-May. We also witnessed last week the start of what might develop into a rally in the FGN debt market following a new CBN strategy on NTBs.

We welcome the monthly data releases from PenCom. We would also welcome independent industry analysis allowing investors to compare the performance of the pension funds.

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