Data from the National Pension Commission (PenCom) on the asset under management (AUM) of the regulated pension industry, has shown that the total AUM for the regulated pensions industry increased by 11.7 percent when compared yearly (y/y) and 1.3 percent month-on-month to almost N15.0 trillion as at December 2022.
According to FBNQuest, the asset class composition of pension fund AUM has barely changed over the years. However, the share of corporate debt in the overall portfolio increased to 11.1 percent in December 2022, up from seven percent the previous year.
In terms of value, corporate debt increased by N717billion to about N1.7trillion, representing an increase of 76 percent y/y.
The issuance of large corporate bonds by Dangote Industries Limited, Dangote Cement, and MTN Nigeria totaling N188 billion, N116 billion, and N115 billion, respectively, was a major factor responsible for the sharp increase in corporate debt in 2022.
Following the scale of corporate issues by the three entities, debt issuance by other firms was quite limited during the year, analysts at FBNQuest stated in a note to clients.
Federal Government Bonds, which account for the largest share of pension funds’ AUM grew by 11 percent y/y to N9.2 trillion and contributed around 61.5 percent of Pension funds under management.
According to the firm, investment in FGN Bonds increased by N894billion as a result of the high-interest rate environment in 2022, which fueled investor interest in fixed-income securities.
In contrast, the value of pension AUM held in domestic equities decreased marginally by one percent y/y to almost N908 billion, taking its share to about 6.1 percent from 6.8 percent in December 2021.
The equity market delivered a return of 20 percent y/y in 2022 while the market posted a strong performance in first half (H1)’22. However, excluding the strong close in the final few weeks, H2’22 was marked by a steady decline says dealers from the investment company.
According to the report, the total number of pension accounts increased by 3.5 percent y/y to almost 9.9 million. This implies an average value of N1.52 million per Retirement Savings Account (RSA) holder, slightly higher than the N1.41 million in the year-earlier period.
“Going forward, we expect fixed income yields to remain elevated due to the anticipated increase in the supply of FGN paper by the Debt Management Office as the agency tries to meet its domestic borrowing target to help plug the N10.8 trillion fiscal deficit,” the firm stated.
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