Wednesday, October 10, 2018 /09:21AM / FBNQuest Research
The assets under management (AUM) of the Nigerian regulated pension industry increased by 17.4% y/y in August to N8.33trn (US$27.3bn). They are growing at a reasonable rate yet, at just 7.3% 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 68.5% of their AUM in August, compared with 72.1% one year earlier. The beneficiary has been domestic money market securities, which gained a 4.5% share over the period.
The role of the PFAs in local debt markets remains pivotal. Their holdings of FGN bonds at end-August represented 47.3% of the stock of the instruments at end-June.
The share of AUM held in domestic equities has declined over 12 months from 8.9% to 7.6%. The NSEASI fell by 1.9% over the same period. The PFAs therefore have to make up some ground to meet revised Pencom regulations stipulating that retirement savings accountholders under the age of 49 must have at least 10% exposure to equities by end-2018.
The latest PenCom data show a total of 8.24 million scheme memberships, implying an average portfolio of N1.01m (unchanged from June).
AUM of PFAs, Aug 2018 (% shares)
Sources: National Pension Commission (PenCom); FBNQuest Capital Research
PenCom has placed advertisements in the local media to announce the launch shortly of a new micro pension for the self-employed and employees of small firms. Access will be via multichannel platforms and investors will be able to withdraw up to 40% of their contributions before their retirement.