By 2024, Nigeria’s total pension assets under management (AuM) are anticipated to reach N4 trillion, with an industry growth projection of 15.9% during the following three years.
Following the unification of exchange rates, which will ultimately lead to the repatriation of funds previously invested in international money markets and reignite foreign interest in naira-denominated assets, growth is anticipated to be driven by increased investments from pension fund administrators and institutional clients.
The company added that among other things, a rise in the size of infrastructure funds, REITs, and segregated portfolios will likely boost development.
The company lamented the Nigerian asset management sector’s poor performance, which has persisted despite the country’s large population of 220 million and high remittance inflows from Nigerians abroad, estimated at $20.9 billion or 9.3 trillion as of 2022.
According to the report, the sector is currently restricted by a sizable informal sector that accounts for an estimated 65% of the country’s GDP, a high poverty rate of 40%, and a dearth of investment options on the Nigerian capital market.
The research claims that Nigeria’s difficult operating environment has caused real earnings and purchasing power to decline, increasing investors’ propensity for assets denominated in dollars.
“The escalation of the year-over-year inflation rate from 15.6 percent in January 2022 to 21.37 percent in December 2022. It is indicative of an unfavorable macroeconomic climate.”
“The parallel market exchange rate stood at ₦750/$ as at 31 December 2022, indicating a 63 percent arbitrage from the official market rate and a 32 per cent depreciation from ₦570/$ recorded in the corresponding period of the prior year.”
Additionally, given the state of the market, investments denominated in naira have lost their appeal, and investors are turning to high-yield alternatives and investments denominated in FCY.
The company said that as investors look for substantially greater incomes from their investments, they have demonstrated a rising preference for privately managed portfolios rather than the frequently more constrained and cautious pooled investment plans.
Along with expanding product distribution and improving customer experience, many asset managers have increased their focus on encouraging the growth of segregated portfolios through their investment advising services.
Additionally, given to the substantial amount of money invested by high-net-worth individuals (HNIs) and businesses seeking exposure to particular investment vehicles (in many cases regional Eurobond issuances), segregated portfolios have continued to make up a sizable chunk of the industry’s AuM.
The company claims that these particular investment options frequently provide a currency hedging and comparatively greater returns than collective investment programs, which may not be broadly available.
