The value of pension assets invested in
the Nigerian equities market rose to N481.8 billion at the end of
November, up from N445.88 billion in January 2016.
The assets under management of the
Nigerian pension industry stood at N6.02 trillion as at the end of
November, according to the National Pension Commission (PenCom). And an
analysis of the figures showed that N481.8 billion are in equities,
indicating 8.02 per cent of the total value.
Although the growth is marginal, market
analysts said
it is an encouraging development considering the fact the
growth was recorded in a year that the market suffered its third
consecutive decline. Besides, pension fund administrators (PFAs) have
been avoiding the equities market for fear of losing their investments
due to what they suffered during the market crash of 2008 and 2009.
While PFAs are allowed by law to invest
about 25 per cent of their pension assets in equities, the level is
about eight per cent. Most of their investments are in federal
government bonds.
PFAs prefer government securities,
investing about 71 per cent of the assets in bonds and treasury bills at
the end of November 2016. The federal government bonds attract the
highest investment of N3.536 trillion or 58.7 per cent, while treasury
bills attracted N749 billion.
However, some market analysts said
despite the bearish market, PFAs could still successfully navigate the
market and make good returns on their investments, saying what they need
is the expertise to analyse and make the right investment decisions.
“We all agree that the market has been
down for the past three years. But amidst this volatility, people are
still making money from the market. Last year for instance, while the
Nigerian Stock Exchange (NSE) All-Share Index declined by 6.17 per cent,
some stocks delivered returns as high as 50 per cent. What really
matters is the ability of PFAs to identify value stocks using their
expertise instead focusing only on government bonds,” a broker said.
In a bid to increase the pension assets,
PenCom said it was targeting the informal sector in the first quarter
of 2017, considering successes recorded by the new pension reform, which
led to significant increase in pensions assets to N6 trillion.
The Director General of the Commission,
Mrs. ChineloAnohu-Amazu, who stated this in Lagos, noted that the
decision was based on the number of people in the informal sector.
The DG, represented by Head, Research
and Corporate Strategy Department of the Commission, Dr. Farouk Aminu,
said the macro-pension scheme was being introduced to the grassroots to
enable an effective system.
“The macro-pension scheme is going down
to the grass roots and make sure that people understand, not only
understand pension but also participate.”
The PenCom boss added that pension
transitional arrangement directory has been introduced to cater for
those that are exempted from the contributory pension scheme.
The commission, she said has further
introduced certain safeguards as a corporate governance mechanism to
ensure safety of the contributory pension scheme, listing some of these
measures to include investing 71 per cent of the N6 trillion equity in
federal government securities, N50 billion mortgage refinancing, strong
legal and institutional framework, separation of custody from
administrative of pension assets, meticulous investment limits and risks
rating requirement, as well as segregation of Pension funds from assets
of operators and daily monitoring of investment of pension funds.
BY Goddy Egene
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