Pension assets hit N257bn in one month

…as TB yields outshine peers

Nigeria’s pension assets have risen by N257 billion in one month, hitting N20.5 trillion at the end of June 2024.

Recent data from the National Pension Commission (PenCom) reveals that the rise marks the second consecutive m/m growth in total assets under management (AUM) of the regulated pension industry following a brief pause in April.

Among the major asset categories, treasury bills registered the highest gain in June, rising by 8 percent m/m to N400 billion.

Treasury instruments have benefited from the prevailing elevated yield environment due to the CBN’s restrictive monetary stance and tight market liquidity, the data said.

On a year on year basis, the total AUM expanded by 22 percent.

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According to the analysis, pension fund holdings in domestic equities continue to rise. In absolute terms, the total value of domestic equities increased by 4 percent m/m to N2.0 trillion in June. As a result, its contribution to the total AUM increased from 9 percent to 10 percent.

The data said Federal Government bonds, which make up more than half (60 percent) of overall pension assets, amounted to N12.2 trillion in June, implying an increase of almost N141billion relative to the previous month.

The sustained interest of pension managers in bond securities can be attributed to the Monetary Poilicy’s (MPC’s) hawkish posture and the Debt Management Office’s (DMO’s) increased issuance of FGN paper.

Looking ahead, we expect PFAs’ to increase their allocation to government securities, driven by higher yields due to the elevated interest rate environment, sustained by the MPC’s recent modest hike rate hike of c.50bps.

“Our expectation is also supported by the increased borrowing needs of the federal government following the legislative amendment of the 2024 budget, which raised the budget from N28.7 trillion to N35.5 trillion”, analysts say.

The PenCom data in June shows about 10.4 million total scheme memberships, implying an average value of N1.97m per RSA account holder, higher than the N1.68 million registered in the year-earlier period.

On a standardised basis, the total pension assets account for only 8.9 percent of Nigeria’s FY’23 GDP, underscoring the low level of pension penetration in the country.