Healthy growth at PFAs, coverage still thin
The assets under management (AUM) of the Nigerian regulated pension industry increased by 20.2% y/y in September to N7.16trn (US$23.4bn), and by 1.0% m/m. They are growing at a decent rate yet, at just 7.1% of 2016 GDP, are running well behind many emerging markets. The local media quote the regulator PenCom as saying that monthly inflows are averaging N30bn. At a recent real estate conference in Lagos, it was argued that the industry has somehow to accommodate the informal sector, which accounts for 83% of the national workforce.
- This could, the argument ran, simultaneously make an impact on Nigeria’s huge housing deficit if contributors were able to allocate some of their monthly payments to a mortgage vehicle.
- Holdings of FGN paper amounted to 71.8% of AUM in September, compared with 70.2% one year earlier. The share of NTBs was rising until August but then declined by 90bps in September as the CBN guided rates downwards. Yields on 364-day paper have fallen by 400bps since end-August.
- PenCom’s latest data do not indicate a surge of investment in domestic equities. The NSEASI had risen by 25.1% y/y at end-September while AUM in the asset class increased by 18.3% over the same period.
· Nigeria’s reformed pension industry, shaped by legislation in 2004 and 2014, has been a success story. Its expansion has benefited from the well-documented abuse under the defined benefits scheme. A bill in the House of Representatives seeks to remove employees of certain public agencies from the contributory pension scheme for reasons that are unclear.
· We welcome the monthly data releases from PenCom. A next step could be independent industry analysis allowing investors to compare performance.