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Assets under management (AUM) of the Nigerian regulated pension industry increased by 20.2% y/y in August to N7.09trn (US$23.2bn).

Healthy growth at the PFAs

The Assets under management (AUM) of the Nigerian regulated pension industry increased by 20.2% y/y in August to N7.09trn (US$23.2bn). Market valuations were not the principal driver. This is a healthy increase when we consider the arrears in pension (and salary) payments to employees of state governments and public agencies. The FGN’s several initiatives to bolster state government finances notwithstanding, one reputable independent research body has estimated that at least 20 states were in arrears of some description as of June this year.

· Holdings of FGN paper amounted to 72.1% of AUM in August, compared with 69.3% one year earlier. There has however been a subtle shift: the share of FGN bonds has declined in line with a reported sharp fall in the PFAs’ bid at the monthly auctions while that of NTBs has risen from 12.1% to 18.6%.

· The PFAs were finally drawn to the stop rates of more than 22% that the CBN was setting at the time at its primary auctions and open market operations (OMO). The market has recently turned, guided by the CBN.

· PenCom’s latest data capture the first three months of the surge on the stock market, driven by new money from offshore investors.

· Nigeria’s reformed pension industry, shaped by legislation in 2004 and 2014, has been a success story. As such, we should not be surprised by moves to undo the good work in the National Assembly and by calls from officials for the AUM (the legal property of savers under contributory schemes) to be invested in government programmes.

· We welcome the monthly data releases from PenCom. We would also welcome independent industry analysis allowing investors to compare the performance of the pension funds.
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