Aisha Dahir-Umar, DG PenCom
Coronation Research in their latest publication, said that the Assets Under Management (AUM) of the regulated pension industry increased by 10.9% y/y to N14.4trn in September ’22.
The figure which was obtained from the latest monthly report released by Nigeria’s Pension Commission (PenCom), Coronation Research noted that the AUM declined slightly by -0.01% m/m.
“We note that FGN debt securities accounted for 63.7% of the total AUM in September ’22 compared with 63.2% recorded in the corresponding period of 2021.”
Meanwhile, other asset classes such as infrastructure funds, real estate, and private equity accounted for 0.7%, 1.6%, and 0.3% of total AUM respectively.
Total FGN debt securities held by Pension Fund Administrators (PFAs) increased by 11.8% y/y and declined marginally by -0.2% m/m to N9.2trn in September.
Furthermore, FGN bonds held by PFAs increased by 12.3% y/y to N8.8trn. This category accounted for 61.0% of the total AUM compared with 60.2% recorded in the corresponding period of the previous year.
“We note that the average NTB yield declined by 65bps m/m as at end September ‘22. The PENCOM report shows that NTBs held by PFAs marginally declined by -0.35% y/y to N185.9bn in September ‘22. NTBs account for just 0.1% of the total AUM, compared with 2.2% recorded in the corresponding period of 2021.
Meanwhile, state government securities held by PFAs increased by 88.1% y/y to N166.5bn and accounted for 1.2% of total AUM, compared with its share of 0.7% recorded in September ’21.
Domestic equity holdings declined by 0.6% y/y to N869bn and accounted for 0.6% of total AUM, compared with 6.7% in September ’21.
This implies a slight shift from domestic equities. We note that the NGX All-Share Index (NGX-ASI) declined by -1.63% m/m September ’22.
According to a separate report released by PENCOM, the total pension contributions remitted to the Retirement Savings Account (RSA) amounted to N238.8bn in Q2 ’22 compared with N191.4bn recorded in Q1 ’22.
This increase can be partly attributed to the increased membership by employers in the contributory pension scheme. Furthermore, remittance from the public sector amounted to N136.8bn (or 57.3% of total RSA) while the private sector remitted N101.9bn or 42.7% in Q2 ’22.
Unemployment occasioned by the negative macroeconomic headwinds and mass emigration of eligible contributors could impact the growth of assets under management (AUM) of the pension industry.
Some challenges such as the hazy macroeconomic environment which has a direct impact on employment figures as well as relatively low penetration, particularly in the informal sector contribute to the sluggish expansion of the industry.
Regarding penetration in the informal sector, PENCOM disclosed that its Micro Pension Plan (MPS) has 81,674 contributors with a total contribution of N296.9bn in Q2 ’22.
“We recall that the MPS was launched in 2019 with the aim of expanding the reach of pension to workers in the informal sector (i.e. the self-employed and employees of organisations with a minimum staff strength of three). The broader goal is to provide pension cover for c.30% of the national workforce by 2024.”
The required facelift for the pension industry can be achieved by improving awareness within the informal economy via well-targeted media campaigns.
Furthermore, enhancing pension compliance efforts in the public sector (civil servants at the state and local government levels, inclusive) will bode well for the industry.
