The latest monthly report from the National Pension Commission (PenCom) shows that total assets under management (AUM) for the regulated pension industry increased by 14% y/y to NGN14.2trn as at end- May 2022. On a m/m basis, the overall AUM increased marginally by 1% m/m from NGN14.1trn in April. FGN bonds were the primary driver of the m/m gain, as their value increased by almost NGN250bn (+3% m/m) to NGN8.5trn, while their share of total AUM expanded by 120bps m/m to 59.7%. If we include treasury bills, sukuk bonds and other agency bonds, FGN securities share increased to around 62.1% of total AUM, up from 60.9% in April.

By way of comparison, Kenya’s Retirement Benefits Authority puts the share of government securities at 45.7% at end-Dec ’21.

The value of pension AUM held in domestic equities increased by 23% y/y (1% m//m) to almost NGN1.1trn, taking its share to c.7.1% from 6.6% in May 2021.

Linked to this is the NGX ASI’s outstanding performance this year, which is one of the best globally. Its 22% year-to-date return contrasts with negative returns delivered by many equity markets around the world.

According to the report, the total number of pension accounts increased to almost 9.7 million compared with c.9.4 million in May 2021. This implies an average value of NGN1.47m per RSA account holder, slightly higher than the NGN1.33m in the year-earlier period.

Although Nigeria’s pension sector has grown remarkably since 2004 when the Pension Reform Act was passed, there is still some ground to cover.

Similar to credit access, Nigeria’s pension savings penetration rate (assets/GDP ratio) is still quite low at around 8.2%. This compares with a global average estimate of c.60%, and closer home, 54% for South Africa.

Going forward, we expect fixed income yields to expand by close to 50bps across the curve over the next couple of weeks, due to the tight market liquidity.