Economy
Pension Assets to Grow 8.5% in 2020—Report
By Modupe Gbadeyanka
Despite the slowdown in economic activities in 2020, a report has shown that the Nigerian pension industry is expected to record a growth this year, with the pension assets rising by 8.5 per cent.
According to the Agusto & Co’s 2020 Pension Industry Report, as at 31 December, the Nigerian Pension Industry’s assets under management stood at N10.2 trillion (or $28.3 billion at $1= N360) as at December 31, 2019, representing an 18.6 per cent growth from the N8.3 billion recorded at the end of 2018 and a 17.2 per cent compound annual growth rate over the last five years.
Growth in managed assets has been increasingly driven by investment returns rather than additional contributions over the last five years.
Specifically, 63.4 per cent of growth was attributable to investment returns earned on managed assets with the outstanding 33.6 per cent representing net annual contributions in the last five years.
It is believed that the sector has evolved over the years from one with predominantly public sector participants running a defined benefit scheme to a mandatory defined contribution system for all government and private-sector employees in the country.
The 2004 pension reform redefined retirement planning in Nigeria and led to a significant boost in the number of enrolees and the size of managed assets in the Industry.
Going forward, Agusto & Co said it expects a considerable slowdown in AuM growth driven by lower contributions as unemployment is expected to rise significantly given the weakened macroeconomic environment following the COVID-19 pandemic.
“Job losses are expected to trigger higher benefit withdrawals as disengaged enrolees seek access to the 25 per cent lump sum drawings permitted by PenCom regulations for employees out of work for more than three months.
“Investment performance is also expected to fall considerably in line with the lower yields on government securities, which account for over 70 per cent of the industry’s asset allocation.
“Nonetheless, we note positively the favourable demography of enrolees, which has over 73.8 per cent below the age of 50 indicating relatively low expectations of liquidity events such as lump- sum payments, annuities and programmed withdrawals.
“We expect AuM to continue to grow albeit at a much slower pace of 8.5 per cent in 2020 and rising to 12 per cent in 2021, which is well below the compound annual growth rate (CAGR) of 17.2 per cent over the last five years,” it said.
The report noted that despite the notable strides in pension reforms and double-digit average growth in the last five years, Nigeria continues to lag behind some emerging markets in terms of pension penetration, with a pension AuM to GDP ratio of 6.8 per cent.
The sector’s AuM to GDP ratio falls below those of Kenya and South Africa with 13.2 per cent and over 120 per cent respectively but compares well with Ghana’s 5 per cent.
The weak pension penetration has been due in part to the previous exclusion of Nigeria’s informal sector (which accounts for an estimated 65 per cent of GDP) and the low compliance rate of eligible organisations.
“Nonetheless, we note increased efforts by the Commission to ensure compliance and drive enrolee participation. Most notable is the micro pension scheme (MPS).
“The micro pension scheme allows previously excluded self-employed persons and organisations with less than three persons to participate in the contributory pension scheme under more flexible rules.
“We remain unconvinced by the structure of the scheme for informal sector operators, given that compliance is optional and prior lessons from the National Health Insurance Scheme indicate voluntary compliance is unlikely to yield significant levels of enrolment,” it said.
Agusto & Co’s 2020 Pension Industry Report provides detailed information on the structure and competitive environment of the Industry as well as the regulatory environment and its impact on the Industry’s performance.
Recent developments and key issues including the most anticipated transfer window, minimum pension guarantee, multi-fund structure and the micro pension scheme are also discussed in detail.
Furthermore, the report provides detailed analysis of the Industry’s financial condition as well as the performance of the individual funds (funds I-IV). Agusto & Co has also ranked PFAs by share of managed assets and fund performance in the report.
By Aduragbemi Omiyale
More petroleum marketers are looking to take advantage being offered by the Dangote Refinery in Lagos through its bulk-purchase incentives, allowing petrol stations to sell premium motor spirit (PMS), otherwise known as petrol, cheaper to motorists.
Recall that recently, Dangote Refinery entered into a deal with MRS Oil Nigeria, Ardova Plc, Heyden for the purchase of petrol at least two million litres at N909 per litre.
With this agreement, MRS Oil has been able to dispense to customers at a pump price of N935 per litre across its stations in Nigeria.
For those not under this arrangement, they have been battling with price instability, especially after depot owners recently increased their price to N950 per litre from N909 per litre because of the rise in crude oil prices in the international market.
Worried by this and attracted by the bulk-purchase agreement incentives of Dangote Petroleum Refinery, the Independent Petroleum Marketers Association (IPMAN) is already having talks to buy directly from the Lagos-based oil facility.
The national president of the group, Mr Abubakar Maigandi Garima, said members are eager to sign on with Dangote Refinery for the bulk-purchase agreement.
He argued that members could not continue to depend on depot owners for products when they can buy directly from the refinery bearing in mind that the minimum quantity to buy from Dangote Refinery is two million litres at N909 per litre.
The desire to be part of the bulk-purchase agreement, it was also gathered, was also apparently being fuelled by the testimonies from motorists who have been praising the impressive burn rate of fuel sourced from Dangote Refinery and sold in MRS filing stations which they said lasts longer compared to other products imported into the country and sold by others.
The management of the Dangote Refinery, citing economic relief provided by President Bola Ahmed Tinubu’s crude-for-naira swap initiative, had announced a bulk-purchase offer incentives to the three leading downstream sector operators, so that Nigerians could heave a sigh of relief on the reduced pump price.
By Adedapo Adesanya
The World Bank has projected a 3.6 per cent economic growth for Nigerian in 2025 and 2026 on the back of ongoing reforms by the federal government.
The Bretton Wood institution in its report titled Global Economic Prospects, January 2025 published on Thursday, said recent reforms, including subsidy removal, Naira liberalisation and the introduction of tax reform bills would help to boost business confidence.
“In Nigeria, Gross Domestic Product (GDP) growth increased to an estimated 3.3 per cent in 2024, mainly driven by services sector activity, particularly in financial and telecommunication services.
“Macroeconomic and fiscal reforms helped improve business confidence. In response to rising inflation and a weak naira, the central bank tightened monetary policy.
“Meanwhile, the fiscal deficit narrowed due to a surge in revenues driven by the elimination of the implicit foreign exchange subsidy, following the unification of the exchange rate and improved revenue administration,” a part of the report stated.
The World Bank noted that the wider Sub-Saharan Africa, to which Nigeria belongs would see a 4.1 per cent growth in the current year, before seeing a 4.3 per cent rise in 2026.
“Growth in Sub-Saharan Africa, SSA is expected to firm to 4.1 per cent in 2025 and 4.3 per cent in 2026, as financial conditions ease alongside further declines in inflation. Following weaker-than-expected regional growth last year, growth projections for 2025 have been revised upward by 0.2 percentage points, and for 2026 by 0.3 percentage points, with improvements seen across various subgroups. At the country level, projected growth has been upgraded for nearly half of SSA economies in both 2025 and 2026.
“Growth in Nigeria is forecast to strengthen to an average of 3.6 per cent a year in 2025-26. Following monetary policy tightening in 2024, inflation is projected to gradually decline, boosting consumption and supporting growth in the services sector, which continues to be the main driver of growth,” it added.
The global lender disclosed that oil production is expected to increase over the forecast period but remain below the 1.5 million barrels per day quota of the Organisation of the Petroleum Exporting Countries (OPEC).
By Adedapo Adesanya
Four price gainers helped the NASD Over-the-Counter (OTC) Securities Exchange close higher by 0.35 per cent on Thursday, January 16.
The value of the trading platform jumped by N3.69 billion during the session to N1.072 trillion from the N1.068 trillion it closed in the preceding session, and the NASD Unlisted Security Index (NSI) made an addition of 10.67 points to wrap the session at 3,103.83 points compared with 3,093.16 points recorded at the previous session.
Industrial and General Insurance (IGI) Plc added 3 Kobo to its price yesterday to trade at 33 Kobo per unit compared with Wednesday’s closing price of 30 Kobo per unit, Newrest Asl Plc appreciated by N2.85 to N31.18 per share from N28.53 per share, 11 Plc gained N2.90 to close at N256.00 per unit versus the N253.10 per unit it finished a day earlier, and FrieslandCampina Wamco Nigeria Plc grew by 21 Kobo to N39.16 per share, in contrast to midweek’s N38.95 per share.
On Thursday. there was an 85.3 per cent increase in the volume of securities traded by investors to 1.2 million units from the 666,494 units recorded in the preceding session, the value of shares traded surged by 8.9 per cent to N18.0 million from N16.5 million, and the number of deals leapt by 65 per cent to 33 deals from 20 deals.
FrieslandCampina Wamco Nigeria Plc remained the most active stock by value (year-to-date) with 3.4 million units worth N134.9 million, trailed by Geo-Fluids Plc with 8.9 million units sold for N43.0 million, and Afriland Properties Plc valued at 690,825 sold for N11.1 million.
IGI Plc closed the day as the most active stock by volume (year-to-date) with 23.5 million units sold for N5.3 million, followed by Geo-Fluids Plc with 8.9 million units valued at N43.0 million, and FrieslandCampina Wamco Nigeria Plc followed with 3.4 million units worth N134.9 million.
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