Thursday, November 11, 2021 / 09:20 AM/ By FBNQuest Research / Header Image Credit: FBNQuest
Ourchart below, based on PenCom's latest monthly report, shows the distribution ofthe pension industry's assets under management (AUM) by asset class. We seefrom the data that AUM rose by 0.8% m/m and 12.4% y/y to NGN13trn (USD31.3bn)as at end-September. FGN debt securities declined by -0.8% m/m to account for63% of the total. When we include corporate and state government issuance, thefixed-income exposure is equivalent to 71.4% of the industry's AUM atend-September. For Kenya, the Retirement Benefits Authority puts the share ofgovernment securities at 44.1% at end-June '21 and listed equities at 16.9%.
ForNigerian pension funds, the share of domestic equities rose slightly from 5.1%to 6.7% over the twelve months, and members' holdings by 49% to NGN874bn. Theall-share index (ASI) rose by 50% over the same period, implying a modest shiftby the PFAs into domestic equities.
Unliketheir counterparts in Kenya whose share of immovable property is at 16.7%,Nigerian pension funds have lower exposures to real estate and infrastructurefunds. As at end-September, funds allocated to infrastructure, real estate andReal Estate Investment Trusts (REITs) accounted for 2.4% (NGN313.7bn) of thetotal. In its defence, PenCom disclosed that investing pension assets intoinfrastructure development has been limited by availability of eligibleinstruments in the financial market.
Thepension industry's exposure to NTBs continues to trend down. The share of NTBsfell -63.6% y/y and -30.9% m/m to NGN284bn, equivalent to 2.2% of the totalAUM. The corresponding figures in 2018, 2019 and 2020 were 18.0%, 23.6% and6.7% respectively. We recall that NTB yields declined significantly as fundmanagers directed proceeds from their OMO bills maturities into the NTBs space– a consequence of the CBN's circulars barring domestic non-bank players fromits OMO auctions in October '19.
FGNbonds accounted for 60.3% of total AUM at end-September, up from 57.4% in theyear earlier perio/d. The FGN's huge deficit financing requirement of NGN5.6trnin the 2021 budget (before the passage of the supplementary by the National Assembly)has contributed to pushing up yields. We do not see this trend changing soonconsidering the FGN's FY 2022's proposed deficit of NGN6.3trn, of whichNGN2.51trn has been set as the domestic borrowing target.
Lastmonth, PenCom introduced a non-interest fund (Fund VI) which complies withnon-interest (Shari'ah) finance principles.
AUM of PFAs, September '21 (% shares) Total: NGN13.0trn |
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Sources: PenCom; FBNQuest Capital Research |
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