The assets under management (AUM) of the Nigerian pension industry increased by 16.1 percent in October 2019 to N9.81 trillion (US$32 billion) compared to the same period last year.
On a monthly basis, Pension assets, a paltry 7.7 percent of GDP, rose 2.4 percent.
The focus of Nigerian PFAs didn’t change in October. It remains largely concentrated on Fixed Income products as has been the case for more than five years.
Their holdings of government debt totaled 69.5 percent of assets under management in October, compared with 70.9 percent one year earlier.
Despite the decrease, there was a shift in their exposure to Treasury Bills, the share of which rose from 19.6 percent to 22.8 percent of the total in the period.
The PFAs are core participants at the monthly auctions held by the Debt Management Office. Their holdings of FGN bonds at end-October represented 47.3 percent of the stock of the instruments at end-June.
For the first time in three months, both sales and the total bid were the strongest for the long bond (Apr ’49) at the auction in November.
“It is generally seen as the favourite of the PFAs for the matching of their assets with their liabilities,” analysts at FBN Quest said in a note to clients.
The proportion of Pension assets invested in domestic equities has declined over the past 12 months from 7.1 percent to 4.9 percent. It’s however important to note that the NSEASI fell by 18.8 percent over the same period.
The pension funds are over concentrated on fixed income government securities and won’t touch the equities market with a ten foot pole, but where else could they go is the question analysts ask.
“Politicians and other interested parties like to suggest alternative investment strategies. Although well-meaning, this overlooks the principal function of the PFAs to maintain the value of their stakeholders’ pensions for retirement,” the FBN Quest analysts added.
The value of pension assets, which is only 7.7 percent of 2018 GDP, is quite little for a country the size of Nigeria, Africa’s most populous nation.
Nigeria lags African peers from South Africa to Kenya.
The latest figure for Kenya, for instance, is 14.0 percent in December 2018, and its asset structure is diverse: 39.4 percent of the total in government paper, 19.7 percent in real estate and 17.3 percent in listed equities.
