Nigeria’s pension assets surge to N17.4trn — PenCom
Nigeria’s pension industry has shown remarkable growth, with the National Pension Commission (PenCom) reporting a significant 20 percent year-on-year increase, bringing the total assets under management (AUM) to N17.4 trillion as of September 2023.
In a recent analysis by FBNQuest Capital Research, the regulated pension sector’s upward momentum was underscored, with the industry’s AUM witnessing a robust expansion.
The growth represents an impressive N2.9 trillion surge in absolute value terms. Despite a slight deceleration in month-to-month growth to 0.3 percent, compared to the nearly 1 percent growth in the previous month, the year-on-year progress has been substantial.
A key driver of this growth has been the 23 percent year-on-year rise in the value of Nigerian bonds, which now stand at N10.9 trillion and constitute 63 percent of the total AUM.
This reliance on government bonds is a reflection of the strict statutory requirements that Nigerian Pension Fund Administrators (PFAs) must adhere to, as well as the limited depth in other asset classes within the market.
FBNQuest Capital points out that the Nigerian pension asset allocation contrasts with markets like Kenya and South Africa, where there is a more diverse spread of assets.
Nigerian PFAs continue to invest predominantly in Federal Government of Nigeria (FGN) bonds due to the current market structure and regulatory environment.
The continued growth of the pension industry is a positive sign for the Nigerian economy, indicating a strengthening of the financial security for retirees and suggesting a growing confidence in the pension system’s management.
PFAs’ asset allocation to corporate debt has been gradually increasing, up by 25 percent y/y, or N369 billion to almost N1.9 trillion.
The industry’s asset allocation to domestic equities is up 58 percent y/y to N1.4trillion, thanks to the solid positive performance of the equity market this year, which has resulted in the Nigerian Stock Exchange All-Share-Index (NGX ASI) delivering a year-to-date return of a 38.8 percent.
In contrast, asset allocation to money market funds fell by -22 percent y/y, or N470 billion, to about N16 trillion.
Regarding the growth of the individual funds, the RSA Fund I grew the fastest with a y/y growth of 102 percent y/y growth to N133 billion.
However, the RSA Fund II delivered the most significant absolute performance of NGN1.2trn to take the Fund’s total AUM to N7.5 trillion.
Based on a total RSA of slightly over 10 million account holders, the total pension AUM translates to roughly N1.7m per account holder.
