The latest monthly data from the National Pension Commission (PenCom) shows that the total assets under management (AUM) of the regulated pension industry increased by 2% m/m and 22% y/y to c.NGN18.4trn as at end Dec ’23.
On a y/y basis, the increase was primarily driven by FGN bonds, whose value increased by c.NGN2.2trn to NGN11.5trn, taking its share of total AUM to 62.4% from 61.5% as at end of Dec ’22. The marked rise in PFAs’ asset allocation to FGN bonds is largely due to record sales of FGN paper by the DMO in 2023, for which the PFAs are willing takers.
Despite their negative real yields, PFAs continue to prefer FGN bonds for their relative safety and liquidity. In addition, the extended maturity profile of bonds strategically aligns with PFAs’ long-term capital allocation objectives.
Excluding money market securities whose share of asset allocation fell slightly by -16% y/y to NGN1.7trn, all other major investment allocations increased y/y.
AUM allocation to corporate debt securities was the second largest at 10% of PFAs asset allocation. Its share grew by 15% y/y to NGN1.9trn.
The value of PFA’s AUM invested in domestic equities increased by 73% y/y to NGN1.6trn. The primary reason for the significant y/y increase in equity investments is the 46% rise of the Nigeria Stock Exchange (NGX) in 2023.
In terms of the respective PFA Funds, the highest gain in absolute terms was made by the RSA Fund II, which increased by almost NGN1.3trn y/y.
The latest PenCom data show a total of 10.1million account holders, which implies an average of NGN1.8m per account holder.
Looking forward, we anticipate that the bulk of PFAs’ AUM growth will stem from increased allocation to FGN bonds.
This expectation is driven by the anticipated continuation of elevated yields, supported by the central bank’s tight monetary policy stance and the increased supply of FGN paper as the DMO seeks to cover the projected fiscal deficit.
