As of December 2022, Nigeria’s pension asset value experienced significant growth, increasing from N13.4 trillion in 2021 to N14.99 trillion, reflecting an 11.6% rise.
According to the latest report published by Augusto & Co, the surge in pension assets was primarily driven by investment returns rather than an increase in contributions.
This trend parallels similar occurrences observed in developed economies.
However, during the same period, the global pension asset declined by 15.4%, amounting to $47.9 billion.
The report also indicated a 3% rise in the number of pension contributors, growing from 9.5 million to 9.8 million in 2022.
This increase was attributed to heightened compliance levels in both the private and public sectors, coupled with enhanced marketing efforts by PFAs (Pension Fund Administrators).
Investment options of PFAs
Concerning investment options for PFAs, Augusto & Co expressed concern over the scarcity of choices available, as a substantial portion of investments were heavily tilted towards FGN bonds.
- “In the last five years, the industry’s asset allocation has been skewed towards FGN bonds, which accounted for over 68% of managed assets.
- “This concentration is due in part to the scarcity of investment-grade, non-sovereign debt issuances, with the FGN continuing to be by far the largest issuer of debt instruments in the Nigerian debt capital market.”
The report also shed light on the competitive landscape within the pension industry, noting that only a few PFAs dominated the market.
As of the end of 2022, there were 19 licensed PFAs with assets under management of over ₦11.9 trillion.
The industry remains oligopolistic, with the top five players controlling over 67% of pension assets while accounting for over 56% of enrollees.
Growth prospects of the pension industry
Looking ahead, the report highlighted the potential for growth and long-term sustainability in the industry with the introduction of Pencom’s RSA (Retirement Savings Account) for mortgages.
Stakeholders were urged to promote this initiative, especially among the middle class, to increase its patronage.
- It said, “In particular, PenCom successfully introduced the groundbreaking ‘RSA for Mortgage’ initiative in 2022, which empowers enrollees to leverage a portion of their RSA balances as valuable equity for acquiring mortgages, opening up a new avenue for them to fulfil their dreams of homeownership.
- “From our perspective, it is imperative to enhance the visibility of this policy to achieve optimal outcomes.”
Augusto & Co projected a 13% year-on-year growth in assets under management within the pension industry, estimating it to reach a value of N19 trillion by 2024.
This anticipated growth signifies the potential for further development and expansion within the sector.