Pension funds in Nigeria invest N1 trillion in Nigerian stocks

Nigerian pension fund administrators (PFAs) increased their investments in the local stock market as investments hit the trillion naira mark, rising by 8.73 billion naira from the 999 billion naira recorded in the month previous.

Year-to-date, pension manager investment in the local stock exchange has increased by N92.43 billion from N915.31 billion recorded at the start of the year. This is according to information from the unaudited Pension Fund Industry Report for the month of May 2022.

In a similar vein, total assets under management hit a record high of N14.19 trillion, having gained N133.76 billion in the month under review and N768.86 billion between January and May 2022.

The number of RSA registrations also peaked at 9.67 million registrations in May 2022, representing an increase of 25,025 from the previous month.

Meanwhile, increased investment in the local equity market by pension fund administrators is not far removed from the bullish performance of the Nigerian Stock Exchange during the month in review, the All-Share Index, which is a benchmark for measuring market performance, gained 6.75% to close at 49,638.94 basis points.

Market capitalization also rose by 1.8 trillion naira to end the month at 26.8 trillion naira, driven by gains from McNichols, Cadbury, Abbey Mortgage Bank, Champion Breweries, International Breweries and Okomu Oil.

Breakdown

  • Investments in corporate debt securities increased by 2.1% to N1.19 trillion in May 2022. Some of these investments include corporate bonds, infrastructure bonds and green bonds.
  • On the other hand, investment in local money market securities decreased by 2.98% to 2.19 trillion naira from 2.25 trillion naira recorded in April 2022.
  • Investments in local money market instruments included time deposits/bankers’ acceptances and commercial paper issues.
  • A review of the report’s breakdown showed that the RSA II fund accounted for the bulk of the contribution to the fund with N6.21 trillion, or 43.8% of total pension assets under management.
  • RSA Fund III followed with N3.83 trillion, representing 27% of total assets. Additionally, Fund Category III increased by N52.5 billion month-on-month during the review period.
  • Existing schemes accounted for 10.1% of total funds, increasing by 5.25 trillion naira to 1.43 trillion naira.
  • In addition, CPFAs accounted for 10.7% of total funds, amounting to N1.52 trillion during the reporting period.

Investments in government securities also increased by N245.45 billion during the review period to N8.81 trillion, or 62.1% of total assets. Investors are now turning to safe-haven government assets such as federal government bonds, treasury bills, agency bonds, Sukuk and green bonds, due to the volatility of different investment portfolios.

Despite the negative real yield on public instruments, investors continue to oversubscribe. The recent issuance of Central Bank Treasury Bills for a one-year term was oversubscribed by 527% in June despite a negative real yield of 11.6% against an inflation rate of 17.71%.

Although the Nigerian stock market has seen an outstanding performance since the beginning of the year, the local stock market is starting to feel the effect of rising interest rates in the notable economies of the world in Nigeria.

A monthly analysis of the All-Share Index shows that the market has lost 3.04% so far in June 2022, which could suggest that bearish sentiments are beginning to grip the local market.