According to the latest data from the National Pension Commission (PenCom), the total asset under management (AUM) of the regulated pension industry experienced a robust monthly growth of 4.1% m/m to nearly NGN16.8trn as at Jun ’23. This growth rate far outpaced the 2.1% m/m growth rate delivered the previous month. The y/y growth rate was also impressive at 17.5%. In terms of penetration rate, the industry’s total AUM is equivalent to c.8.4% of (2022) GDP. This compares unfavourably with the global average of 29.4% (in 2020) according to World Bank data.
Excluding money market securities whose value share of pension fund assets decreased by NGN168bn m/m to NGN1.6trn, almost all the major asset categories accounted for the m/m increase of NGN654bn.
Notably, FGN bonds which typically account for the largest share of PFAs AUM (c.62% Jun ‘23) increased markedly by NGN399m to NGN10.4trn.
A major factor underscoring the rise in the value share of FGN Bonds is the increased supply of FGN paper due to the market this year, due to its higher domestic borrowing target of NGN7trn compared with around NGN4.4trn in 2022.
In response to mounting inflationary pressure, the monetary policy committee raised the policy rate by 25bps to 18.75% during their recent meeting last month. Consequently, bond yields have increased by roughly 60bps since then.
PFAs’ investment in corporate bonds also increased by around NGN160bn to NGN1.9trn, taking its share of pension AUM to around 11.2%.
Investments in domestic equities also increased by almost NGN150bn to NGN1.3trn, implying a value share of 7.6%.
This notable rise in equity investments can be primarily attributed to investors’ positive response to market reforms implemented by the new administration after the President’s inauguration on May 29.
Although the industry has continued to deliver steady growth, efforts are still required to address the relatively low penetration rate compared to global benchmarks.
Source: FBNQuest Research