Pension fund managers in the first three months of 2024, purchased Nigerian stocks worth N550 billion, taking it to a record N2.32 trillion as of the end of March.
These figures show a significant 31 per cent increase in equity investments to N2.32 trillion as of March 2024 compared to N1.77 trillion in December 2023, according to National Pension Commission data.
This increases the total equity contributions to 11.79 of the PFAs’ total portfolio in March, compared with 8.97 per cent in December 2023, according to Businessday.
This is as the total assets under management (AUM) of all the PFAs grew to N19.67 trillion at the end of March 2024 from N18.36 trillion in December 2023.
The trend reflects a growing confidence in the equity market among pension funds, according to analysts at the Pension Fund Operators Association of Nigeria interpreting the report.
The N550 billion has helped the stock market to a year-to-date 39.84 % return in the 1st quarter of 2024, which is Africa’s second-best performance year on year.
This market has thrived despite the Central Bank of Nigeria’s aggressively increasing its rates this year. This year, the CBN increased its benchmark interest rate by a total of 600 basis points to 24.75 per cent.
Higher interest rates mean increased expenses for companies which then negatively impacts the stock market, however, pension funds have contributed to its growth. the stock rally.
The pension body highlighted the role of pension in investment and said pension funds were a key player on the investment landscape and that they tend to be the biggest off-takers for different financial instruments such as government securities.
Investments in FGN securities, which still account for more than 60 percent of total assets under management, rose 2.3 percent to N12.2 trillion in the three months from N11.92 trillion as of the end of 2023.
Oguche Agudah, chief executive officer, said several factors contributed to this growth.
He said “Domestic Ordinary shares, Foreign Ordinary Shares, government debt securities, corporate debt and cash held by pension funds accounted for almost 93 percent of this growth”
However, Agudah pointed out in particular that between December and January, the value of ordinary shares held by pension funds increased by more than N 360 billion. As the All Share Index crossed another milestone, this was driven by a rally in shares of NGX.
“Further highlighting this is the increase in allocation to domestic listed equities by the pension funds from 8.56 percent to 9.89 percent of their total assets,” he noted.
According to him, the surge was also driven by foreign ordinary shares. As a result of the devaluation of the Naira, foreign assets have been revalued upwards by more than N118 billion and this has led to an increase in their value for CPFAs.
