Our chart today is derived from the National Pension Commission (PenCom) data on the asset under management (AUM) of the regulated pension industry. Based on the Commission’s latest report, the total AUM for the regulated pensions industry increased by 11.7% y/y and 1.3% m/m to almost NGN15.0trn as at Dec '22. The asset class composition of pension fund AUM has barely changed over the years. However, the share of corporate debt in the overall portfolio increased to 11.1% in Dec '22, up from 7% the previous year. In terms of value, corporate debt increased by NGN717bn to c.NGN1.7trn, representing an increase of 76% y/y.
The issuance of large corporate bonds by Dangote Industries Limited, Dangote Cement, and MTN Nigeria totalling NGN188bn, NGN116bn, and NGN115bn, respectively, was a major factor responsible for the sharp increase in corporate debt in 2022.
Following the scale of corporate issues by the three entities, debt issuance by other firms was quite limited during the year.
FGN Bonds which account for the largest share of pension funds’ AUM grew by 11% y/y to NGN9.2trn and contributed around 61.5% of PFAs' funds under management.
Investment in FGN Bonds increased by NGN894bn as a result of the high-interest rate environment in 2022, which fueled investor interest in fixed-income securities.
In contrast, the value of pension AUM held in domestic equities decreased marginally by 1% y/y to almost NGN908bn, taking its share to c.6.1% from 6.8% in Dec ‘21.
The equity market delivered a return of 20% y/y in 2022. The market posted a strong performance in H1 ’22. However, excluding the strong close in the final few weeks, H2 '22 was marked by a steady decline.
According to the report, the total number of pension accounts increased by 3.5% y/y to almost 9.9 million. This implies an average value of NGN1.52m per RSA account holder, slightly higher than the NGN1.41m in the year-earlier period.
Going forward, we expect fixed income yields to remain elevated due to the anticipated increase in the supply of FGN paper by the Debt Management Office as the agency tries to meet its domestic borrowing target to help plug the NGN10.8trn fiscal deficit.