Thursday, August27, 2020 / 09:54 AM / by  FBNQuest Research / Header ImageCredit: Indian Express

Assetsunder management (AUM) of the regulated pension industry in Nigeria rose by18.8% y/y in June to N11.09trn (US$28.7bn), and by 2.7% m/m. The monthlyreports from the regulator (PenCom) show an asset mix heavily skewed towardsFGN debt securities, which represented 66.1% of the total. In contrast, itsKenyan counterpart, the Retirement Benefits Authority, puts the share ofgovernment securities at 39.4% at end-2018. It also shows immovable propertyand listed equities at 19.7% and 17.3% respectively: the current Nigerianequivalents are 2.0% and 4.7%.

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

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

The very modest exposure to the infrastructure, either direct orindirect, has good reasons and yet is still a popular talking point, givenNigeria's weaknesses in the field. The CBN governor has this month obtained theapproval of the FGN for the launch of a N15trn infrastructure developmentcompany, which is to be owned by the CBN, the sovereign wealth fund (NSIA) andthe Lagos-based Africa Finance Corporation, for which the CBN supplied theanchor capital. The project does not currently foresee a cash injection by thePFAs.

AUM of PFAs, Jun 2020 (% shares)

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

The average value of a retirement savings account (RSA) at end-June wasN946,000, compared with N926,000 in May. The latest report from Pencom alsoshows that just N32m was invested in RSA fund V dedicated to the new micropensions for the informal sector and firms with less than three employees, anincrease of N7m in one month.

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