Nigeria’s pension fund assets may rise to N19 trillion by 2024, considering its current speed of growth.
Agusto &Co, in its just released 2023 pension industry report, says it foresees a 13 per cent year-on-year growth in the pension industry’s Assets Under Management(AuM), propelling the total pension assets to an impressive N19 trillion by the end of 2024.
It envisions that this growth will be supported by an anticipated increase in rates on fixed-income securities, specifically bank placements and a continued upswing in the stock market, adding that, they are optimistic that the current rally in the equities market, marked by an impressive 27.37 per cent surge in the NGX All-Share Index (ASI) in the past one year, underpinned by the raft of reforms ushered in by the new government, will be sustained in the near term.
Given the NGX’s bullish stance in the Nigerian Stock Exchange, the firm expects Pension Fund Administrators (PFAs) to realign their investment portfolios to capitalise on favourable market conditions, which could potentially amplify investment returns in the near to medium term.
Furthermore, Agusto & Co. firmly believes that the steady rise in contributions will be driven by robust regulatory oversight and increasing awareness of the micro pension scheme.
“However, it is critical to recognise that increased emigration, job losses, and rising inflation may pose a significant risk to our projections. These factors have the potential to impede pension asset growth by delivering negative real returns on investments,” Agustin & Co noted.
Disclosing that Nigeria has the second-largest pension industry in Africa with assets under management (AuM) of N16.1 trillion ($34.9 billion) as at 31 May 2023, representing a 13.5 per cent increase from the corresponding period in the prior year, the report added that, this growth was primarily fueled by robust investment returns and, to a lesser extent, by additional contributions, mirroring the patterns observed in other well-established pension markets.
It stated that the industry witnessed a notable increase in the number of new contributors, surpassing three hundred thousand individuals. As a result, the total membership of the contributory pension scheme (CPS) reached 9.9 million Retirement Savings Account(RSA) enrollees as at 31 May 2023, reflecting a three per cent growth compared to the corresponding period.
The upswing in the number of enrollees, it said, can be attributed to the commendable rise in compliance levels across both the private and public sectors, coupled with the intensified marketing activities undertaken by pension fund administrators (PFAs).
“A significant informal sector (estimated at 65 per cent of GDP), an elevated inflation rate of 22.41 per cent, a high poverty rate of 40 per cent, and restricted investment options afforded by the Nigerian capital market continue to restrain the expansion of the industry. Particularly, the real value of pension assets continues to shrink as the real return on 364-day Treasury Bills remains firmly in negative territory (averaging -13.3 per cent so far in 2023),” it pointed out.
