Pension industry pulls N13.9trn AuM in March as FMs lose interests in T-bills

BY CHARLES ABUEDE

Latest industry data released by the National Pension Commission (PenCom) shows that total assets under management (AuM) for the regulated pension industry in Nigeria grew 12 percent to N13.87 trillion as of the close of the month of March 2022 driven by high exposure of fund managers to securities of the federal government as preferred investment options.

Although, it is now becoming more obvious that the interest of these fund managers in government treasury bills is beginning to see a pullback.

According to the data published on the website of the industry regulator, there was a one percent increase on a month on month comparison in the total assets under management from N13.76 trillion reported in February 2022, signifying that the fund grew by about N113.75 billion during the 31-day period between February and March.

Similarly, domestic money market funds were the major beneficiary of the increase across the review month as their value rose to N2.25 trillion or a 69 basis points month on month rise in total assets under management share to 16.2 percent. On the other hand, the share of FGN debt securities in the asset mix trended down slightly by five basis points month on month to 61.3 percent or N8.5 trillion in value terms.

A critical analysis of the PenCom data shows that during the month of March, the pension industry’s exposure to Nigerian Treasury Bills (NTB) continued to trend south. The share fell to just 1.1 percent of total assets under management compared with 1.3 percent in February.

The fall can be attributed to the instrument’s low single-digit yields, which were engineered by the CBN following its prohibition of domestic non-bank institutions from participating in OMO auctions. And distinct from its African peers, PFAs’ exposure to infrastructure funds and real estate properties is paltry at N75 billion and N156 billion, respectively.

On the infrastructure funds, it would be recalled that last month, the Central Bank of Nigeria (CBN) in a collaborative effort with the Nigerian Sovereign Investment Authority (NSIA) and the African Finance Corporation (AFC), established the Infrastructure Development Company (InfraCorp), which is projected to raise around N15 trillion to fund infrastructure projects across the country. However, it has largely been noted that PFAs could be a potential source of funding for the company if the appropriate framework is in place.

Furthermore, the pension industry’s exposure to FGN bonds declined marginally to 58.7 percent of their total asset under management from 59.1 percent in February while the value of AuM allocated to domestic equities fell by N33 billion month on month to N944 billion in March, or a 6.8 percent share, down from 7.1 percent in February.

However, given the strong performance posted by the stock market in April, analysts had expected equities’ share of the industry’s AuM to trend modestly upward.

Meanwhile, it is noteworthy that the Nigerian pension funds have always, on a historical trend, favoured government debt as an asset class due to the scantiness of good quality investible securities available to them. Other associated whys and wherefores include the relative lack of depth of the equities market, and portfolio safety considerations.