Wednesday, October 21, 2020 / 10:14 AM / ByFBNQuest Research / Header Image Credit: FBNQuest 

Assetsunder management (AUM) of the regulated pension industry in Nigeria rose by20.2% y/y in August to N11.35trn (US$29.4bn), and by 0.4% m/m. The monthlyreports from the regulator (PenCom) show an asset mix heavily skewed towardsFGN debt securities, which represented 66.3% 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 1.9% and 4.8%.

ThePFAs' holdings of FGN paper are principally bonds (56.3% of total AUM). Theheadline to share, however, has been the meteoric fall in the share of NTBs by1,446bps y/y as a result of the crashing of yields in Q4 2019.

The fallin holdings of NTBs has been balanced by higher exposure to FGN bonds and localmoney market instruments. In turn, however, the FGN bond returns have nowfallen sharply. Yields for long bonds are lower than those for the FGN'sEurobonds of similar tenor, as well as being about half the rate of underlyingheadline inflation. Decision time would appear to be fast approaching for thePFAs although the long bonds are attractive for matching purposes.

Some maybe tempted by the dividend yields offered by a small number of listed equities.Others may have to revisit their thinking on existing products such as privateequity funds. All will be hoping for new investment alternatives approved bythe regulator.

Theaverage value of a retirement savings account (RSA) at end-August was N963,000,compared with N959,000 in July. The latest report from Pencom also shows thatjust N44m was invested in RSA fund V dedicated to the new micro pensions forthe informal sector and small firms.

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