10 July 2018 ( Lagos ) :The assets under management (AUM) of the Nigerian regulated pension industry increased by 24.7% y/y in April to N8.10trn (US$26.5bn). They are growing at a reasonable rate yet, at just 7.1% 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 70.2% of their AUM in April, compared with 72.8% one year earlier. The beneficiary has been domestic equities, the share of which gained 2.0% over the 12-month period.

The role of the PFAs in local debt markets remains pivotal. Their holdings of FGN bonds at end-April represented 44.5% of the stock of the instruments at end-March.

PenCom’s latest data do not point to a surge of investment in domestic equities. The NSEASI rose by 60.2% in the 12 months to end-April while AUM in the asset class increased by 54.2% over the same period.

Revised Pencom regulations stipulate that retirement savings accountholders under the age of 49 must have at least 10% exposure to equities by end-2018. If analysts add foreign equities to domestic, they arrive at a total of 9.9% at end-April in aggregate (ie accountholders of all ages including those with a smaller or zero requirement to hold equities). Those aged 50 or above represented 25.6% of the total.

PenCom data as at end-April show a total of 8.03 million scheme memberships, implying an average portfolio of N1.03bn.

Source : Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.

Reporting for EasyKobo on Tuesday, 10 July 2018 in Lagos, Nigeria