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Healthy Growth at PFAs, Coverage Still Thin

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Wednesday, November 15, 2017 / 9:35 AM /FBNQuest Research                                                                                       

The assets under management (AUM) of the Nigerian regulated pension industry increased by 20.2% y/y in September to N7.16trn (US$23.4bn), and by 1.0% m/m. They are growing at a decent rate yet, at just 7.1% of 2016 GDP, are running well behind many emerging markets.  The local media quote the regulator PenCom as saying that monthly inflows are averaging N30bn. At a recent real estate conference in Lagos, it was argued that the industry has somehow to accommodate the informal sector, which accounts for 83% of the national workforce.                                                                                                                  

This could, the argument ran, simultaneously make an impact on Nigeria’s huge housing deficit if contributors were able to allocate some of their monthly payments to a mortgage vehicle. 

Holdings of FGN paper amounted to 71.8% of AUM in September, compared with 70.2% one year earlier. The share of NTBs was rising until August but then declined by 90bps in September as the CBN guided rates downwards. Yields on 364-day paper have fallen by 400bps since end-August. 

PenCom’s latest data do not indicate a surge of investment in domestic equities. The NSEASI had risen by 25.1% y/y at end-September while AUM in the asset class increased by 18.3% over the same period.

 

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Nigeria’s reformed pension industry, shaped by legislation in 2004 and 2014, has been a success story. Its expansion has benefited from the well-documented abuse under the defined benefits scheme. A bill in the House of Representatives seeks to remove employees of certain public agencies from the contributory pension scheme for reasons that are unclear. 

We welcome the monthly data releases from PenCom. A next step could be independent industry analysis allowing investors to compare performance.
 

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