Limited Penetration of the PFAs

Pension asset

The assets under management (AUM) of the regulated pension industry increased by 16.5% y/y in September to N8.35trn (US$27.2bn). They are growing at a reasonable rate yet, at just 7.3% of 2017 GDP, are running well behind many emerging markets. Nigeria was relatively slow (2004) with its legislation creating a sound structure for regulated pensions.

The comparable figure for Kenya at end-2017 was 13.9% of GDP. The industry in Nigeria is in need of several new products and innovative leadership.

  • The industry’s holdings of FGN paper amounted to 70.7% of their AUM in September, compared with 71.9% one year earlier. The beneficiary has been domestic money market securities, which gained a 2.5% share over the period.
  • The role of the PFAs in local debt markets remains pivotal. Their holdings of FGN bonds at end-September represented 48.5% of the stock of the instruments at end-June.
  • The share of AUM held in domestic equities has declined over 12 months from 8.7% to 7.2%. The NSEASI fell by 7.5% over the same period. The PFAs, therefore, may have some ground to cover to meet revised Pencom regulations stipulating that retirement savings account holders under the age of 49 must have at least 10% exposure to equities by end-2018. We understand that holdings in mutual funds are allowable to meet the threshold.
  • The latest PenCom data show a total of 8.27 million scheme memberships, implying an average portfolio of N1.01m (unchanged from September).
AUM of PFAs, Sep 2018 (% shares) Total: N8.35trn

Sources: National Pension Commission (PenCom); FBNQuest Capital Research
  • From January the PFAs will be able to market micro pensions for the self-employed and employees of small firms. Investors will be able to withdraw up to 40% of their contributions before their retirement.