The Popularity of FGN Bonds with the PFAs, AUM Rose by 18.8% in June 2020 to N11.09trn


Thursday, August 27, 2020 / 09:54 AM / by  FBNQuest Research / Header Image Credit: Indian Express


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Assets under management (AUM) of the regulated pension industry in Nigeria rose by 18.8% y/y in June to N11.09trn (US$28.7bn), and by 2.7% m/m. The monthly reports from the regulator (PenCom) show an asset mix heavily skewed towards FGN debt securities, which represented 66.1% of the total. In contrast, its Kenyan counterpart, the Retirement Benefits Authority, puts the share of government securities at 39.4% at end-2018. It also shows immovable property and listed equities at 19.7% and 17.3% respectively: the current Nigerian equivalents are 2.0% and 4.7%.


The PFAs' holdings of FGN paper are principally bonds (56.9% of total AUM). The narrative to share, however, has been the meteoric fall in the share of NTBs by 111bps m/m and by 1,157bps y/y as a result of the crashing of yields   in Q4 2019.


The fall in holdings of NTBs has been balanced by higher exposure to FGN bonds, local money market instruments and corporate bonds.


The very modest exposure to the infrastructure, either direct or indirect, has good reasons and yet is still a popular talking point, given Nigeria's weaknesses in the field. The CBN governor has this month obtained the approval of the FGN for the launch of a N15trn infrastructure development company, which is to be owned by the CBN, the sovereign wealth fund (NSIA) and the Lagos-based Africa Finance Corporation, for which the CBN supplied the anchor capital. The project does not currently foresee a cash injection by the PFAs.


AUM of PFAs, Jun 2020 (% shares)

Total: N11.09trn

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Sources: National Pension Commission (Pencom); FBNQuest Capital Research


The average value of a retirement savings account (RSA) at end-June was N946,000, compared with N926,000 in May. The latest report from Pencom also shows that just N32m was invested in RSA fund V dedicated to the new micro pensions for the informal sector and firms with less than three employees, an increase of N7m in one month.


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