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.