By Chinwendu Obienyi
The National Pension Commission (PENCOM) has announced that FGN bond instruments held by Pension Fund Administrators (PFAs) increased by +17.2 per cent year-on-year (y/y) to N11.5 trillion at the end of March 2024.
According to the monthly report released by PENCOM, the FGN bonds account for 58 per cent of the total asset under management (AuM) even though it declined by -2.4 per cent month-on-month (m/m) on the back of a 10-year tenure FGN bond maturity (N719.9 billion).
The report revealed that the assets under management (AUM) of the regulated pension industry in the country, increased by +26.2 per cent y/y to N19.7 trillion.
Meanwhile on an m/m basis, the AUM declined marginally by -0.5 per cent, marking the first decline since September 2022. Notably, FGN debt securities accounted for 62 per cent of the total AUM in March 2024.
Meanwhile, other asset classes such as private equities, real estate, and infrastructure funds, accounted for 0.4 per cent, 1.4 per cent, and 0.8 per cent of total AUM, respectively. Similarly, the average FGN bond yield increased by +219 basis points (bps) m/m as at end of March 2024, signifying that FGN bonds remain attractive due to its lower risk profile and elevated yields.
The PENCOM report further showed that NTBs held by PFAs grew by +120 per cent y/y and increased by +42.5 per cent m/m to N407.6 billion in March 2024 as the average NTB yield increased by +250bps m/m. This asset class accounted for just 2.1 per cent of the total AUM in the same month.
Meanwhile, State government securities held by the PFAs increased by 64.1 per cent y/y to N266.2bn in the month under review. Domestic equity holdings surged by 99.6 per cent y/y and 8.7 per cent m/m to N2.1 trillion in the same period, accounting for 10.6 per cent of the total AUM in March 2024 compared with 9.7 per cent in February 2024.
The NGX-All-Share index (NGX-ASI) rose by +90.6 per cent y/y and +4.6 per cent during the same period. Furthermore, Year-to-Date (28-March 2024) return on index rose by +18.1 per cent to close at 39.8 per cent from 33.7 per cent in February 2024.
However, the market showed a bearish trajectory as the NGX-ASI declined by -6.1 per cent m/m, partly, on the back of relatively weak corporate earnings amid inflationary conditions.
According to PENCOM, the total pension contributions since inception remitted to the Individual Retirement Savings Account (RSA) increased by +17.3 per cent y/y to N9.9 trillion as at end-December 2023 compared with N8.5 trillion recorded as at December 2022.
Remittance from the public sector accounted for 52 per cent, while private sector accounted for 48 per cent of the total pension contributions respectively, partly attributed to improvement in the efforts to expand pension coverage.
Notably, PENCOM added a total number of 8,927 micro pension contributions (MPCs) in Q4 2023 bringing the total number of registered MPCs in the Micro pension plan from inception to 114,382 as at end-December 2023 from 89,327 as at end-December 2022.
Reacting to the development, Chief Economist at Coronation Research, Chinwe Egwim, said that “Given expectations of higher yields in the fixed income market on the back of continuous tightening or a hold stance of the CBN at the next MPC meeting, PFAs are likely to reallocate a greater portion of pension assets to fixed income securities”.