Agusto & Co: Nigeria’s Assets under Management Hits N16.1tn in 2023

* Ranked second-largest pension industry in Africa

Gilbert Ekugbe

The latest Agusto & Co report on the pension industry has stated that Nigeria’s Assets under Management (AuM) stood at N16.1 trillion ($34.9 billion) as at May 31, 2023.

In a report obtained at the weekend, Agusto & Co stated that this represented a 13.5 per cent increase from the corresponding period in the prior year, stating that the growth was primarily fueled by robust investment returns and, to a lesser extent, by additional contributions. This, it stated mirrored the pattern observed in other well-established pension markets.

The report added that the industry witnessed a notable increase in the number of new contributors, surpassing 300,000 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 3 per cent growth compared to the corresponding period.

“The upswing in the number of enrollees 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),” August & Co said.

The statement however bemoaned that a significant informal sector (estimated at 65 per cent of Gross Domestic Product (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 continued 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),” the report stressed.

According to Agusto & Co, as at the end of 2022, there were 19 licenced PFAs with AuM in excess of N11.9 trillion in Nigeria.
Agusto & Co noted that a significant majority of the industry’s assets, precisely 67 per cent, were under the management of the top five players in the industry.
“The aforementioned players, collectively command an impressive 56 per cent share of the Industry’s enrollee base. With the increased awareness of the transfer window and its operational mechanisms, coupled with the notable entry of two prominent holding companies in Nigeria, namely Access Holdings and GTCO Holdings, into the industry, Agusto & Co. anticipates an elevated level of competition among PFAs as they strive to expand their enrollee base,” the report stated.

“From our perspective, the integration of innovation driven by technology and the enhancement of customer service will serve as pivotal factors in driving the performance of PFAs in the near to medium term. “However, it is important to note that this may not have a substantial impact on the market share dynamics within the industry, as the leading players have consistently maintained their dominant positions, particularly through their innovative utilisation of technology and brand strength.

“However, Agusto & Co. foresees significant shifts occurring within the ranks of the top five players in the short to medium term,” the report added.
The report added that the industry continues to operate within a highly regulated environment, positioning itself as a significant player in the financial services sector.
It noted that the National Pension Commission (PenCom) remains steadfast in its commitment to implementing initiatives aimed at bolstering transparency and fostering active engagement in pension schemes.

“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 in order to achieve optimal outcomes,” the report advised.
Agusto & Co. anticipated that stakeholders would proactively undertake initiatives to amplify awareness of the policy, thereby guaranteeing its long-term sustainability and efficacy.
It also firmly believes that the highest adoption rates would be observed among individuals belonging to the middle-upper income bracket, who can afford to buy homes in the first instance.
“Agusto & Co. has also taken note of PenCom’s directive, which was issued in October 2022, to prohibit PFAs from engaging in the practice of gifting RSA holders. This directive aims to address the issue of unhealthy competition and foster a culture of transparency within the industry,” the report averred.
Going forward, Agusto & Co. foresaw a 13 per cent year-on-year growth in the pension industry’s AuM, propelling the total pension assets to an impressive N19 trillion by the end of 2024.