Economy

Pension Fund Managers Ease Exposure to Equities

Published

8 years ago

21/04/2017

By Quantitative Financial Analytics

In a bid to bolster their performance, strengthen their risk management strategies and in response to the lacklustre performance of the Nigerian stock market, pension fund managers in Nigeria have increasingly been reducing their exposure to the stock market by allocating less and less of their assets to domestic ordinary shares and more and more to FGN bonds and other fixed income securities.

Analysis of available information conducted by Quantitative Financial Analytics indicates that allocation to domestic ordinary shares has been suffering some reductions month after month since 2013.

As at December 2013, 14.58 percent of pension funds’ assets were invested in domestic ordinary shares, by the same period in 2014, investment in domestic ordinary shares had fallen to 11.79 percent.

As if that was not enough, by December 2015, pension fund managers reduced their exposure to the stock market by a further 2 percent, allocating only 9.76 percent to domestic stock market.

The downward spiral continued in December 2016 when just 8.13 percent of pension fund assets were allocated to domestic ordinary shares only for the sorry allocation to still suffer further reduction in January 2017 to stand at 7.79 percent.

As at February 28, 2017, only 7.45 percent of pension fund assets were in domestic ordinary shares showing that over the last five years or so, pension funds have reduced their exposure to the domestic stock market by 7.13 percent and it looks like they are not done yet.

At the other end of the asset allocation spectrum is the tendency for the pension funds to overweight their asset allocation to fixed income securities especially FGN Bonds.

As at December 2013, FGN Bonds and Treasury Bills accounted for 58.75 percent of pension fund assets, but by February 2017, allocation to FGN Bonds and Treasury bills has increased to 72.36 percent, an increase of 13.61 percent.

Although pension funds have been recording positive returns month after month, (in trickles though), their asset allocation as indicated above is not reminiscent of diversified portfolios and may therefore be suboptimal.

Optimal asset allocation is built on the premise that different asset classes offer returns that are not perfectly correlated and diversifying portfolios across such asset classes helps to optimize risk-adjusted returns.

It does appear however that Nigerian pension fund managers’ ability or willingness to diversify is being stymied or fettered by regulatory impediments which specify, among other things, the required maximum allocation to a given asset class.

The importance of asset allocation as a major source of investment returns has been highlighted by researchers and analysts alike.

A widely-cited study of pension plan managers has found out that 91.5 percent of the difference between one portfolio’s performance and another’s are explained by asset allocation.

Specifically, in 1986, Gary P. Brinson, CFA, Randolph Hood, and Gilbert L. Beebower posited that asset allocation is the primary determinant of a portfolio’s return variability, with security selection and market timing playing minor roles.

Subsequent research results have come to support that assertion and it is hoped that in the near future and subject to the availability of asset classes and within limits of regulatory entanglements, Nigerian pension fund managers will diversify their portfolios optimally.

Economy

EFCC Intercepts Eight Trucks With Illegally Mined Minerals in Benue

Published

19 hours ago

21/03/2025

Adedapo Adesanya

By Adedapo Adesanya

The Economic and Financial Crimes Commission (EFCC) has intercepted eight trucks transporting suspected illegally mined solid minerals in Benue State as it intensifies the crackdown on illegal mining activities in the North Central region of the country.

This was disclosed in a statement by the anti-graft agency, on its official X handle, where it confirmed the arrests of the individuals involved.

The EFCC stated that the trucks were seized on Wednesday, March 19 in the Katsina-Ala Local Government Area of Benue State.

According to the EFCC, preliminary investigations revealed that the minerals—believed to be fluorite and iron stones—were mined from unauthorized sites in Logo Local Government Area of the state.

Business Post reports that the Benue State government had paused all mining activities, as it was responsible for some of the crisis in the state.

“We are determined to combat the illegal mining of Nigeria’s mineral resources and bring perpetrators to justice. The suspects will be charged to court as soon as investigations are concluded,” EFCC tweeted on X, formerly known as Twitter.

Illegal mining has been a growing concern in Nigeria, with authorities warning that the illicit extraction of solid minerals deprives the country of valuable revenue and contributes to environmental degradation.

The EFCC was involved in the issue of mining to quell further economic losses facing the nation.

According to the Minister of Solid Minerals, Mr Dele Alake, the government is losing trillions of Naira to unregulated and illegal mining activities.

He disclosed earlier this week that the Federal Executive Council (FEC) had approved N2.5 billion for the procurement of an integrated solution framework to combat illegal and unregulated mining activities.

He also disclosed that his ministry had opted for dialogue and collaboration with state governors rather than confrontation, saying many governors were initially unaware of the constitutional framework governing mining, but have now been engaged through discussions facilitated by the Nigeria Governors’ Forum (NGF).

Mr Alake noted that states must collaborate with federal authorities in addressing illegal mining and related criminal activities.

Economy

NGX, CBN, MinieMoney Teach Over 200 Students Money Management Tips

Published

20 hours ago

21/03/2025

Aduragbemi Omiyale

By Aduragbemi Omiyale

As part of the 2025 Global Money Week celebration, over 200 students were recently selected and equipped with essential financial literacy skills.

This seminar on money management tips was put together by the Nigerian Exchange (NGX) Group Plc, in collaboration with the Central Bank of Nigeria (CBN) and MinieMoney.

It underscored a shared commitment to fostering financial inclusion and equipping young Nigerians with the knowledge required for long-term financial well-being.

The event was organised to mark the Global Money Week, is a global initiative currently in its 13th edition designed to promote financial education among young people, ensuring they develop the critical thinking skills needed to make informed financial decisions.

The 2025 theme, Think Before You Follow, Wise Money Tomorrow, reinforces the importance of strategic financial planning from an early age.

The Head of Trading and Products at NGX, Mr Abimbola Babalola, highlighted the transformative power of financial literacy in shaping students’ futures.

“The financial choices you make today will determine the quality of your life tomorrow. Understanding saving, investing, and responsible money management early on will put you on the path to financial success,” he stated.

Also, the Assistant Director of the Consumer Protection Department at CBN, Mr Christian Mordi, introduced the CBN’s ‘Sabi Money’ platform, designed to enhance financial education nationwide.

“Financial literacy extends beyond numbers; it is about developing discipline, patience, and informed decision-making skills that foster economic security,” he noted.

On his part, the chief executive of MinieMoney, Mr Gbolahan Faniran, emphasized the importance of early investment habits and leveraging the power of compound interest.

“Achieving financial success is not about following trends but about making intentional money choices today that ensure a secure future,” he said.

Business Post reports that students from Vivian Fowler Memorial College for Girls, Dansol High School, Kith and Kin Educational Schools, Caleb British International School, Lagos Preparatory and Secondary School, and The Bells Comprehensive Secondary School attended the programme.

They engaged in insightful discussions on financial literacy, investment strategies, and capital market operations, with the added opportunity to experience firsthand the dynamics of the NGX trading floor.

Economy

Geo-Fluids, Two Others Weaken NASD OTC Exchange by 0.13%

Published

21 hours ago

21/03/2025

Adedapo Adesanya

By Adedapo Adesanya

The trio of Geo-Fluids Plc, Food Concepts Plc, and Industrial and General Insurance (IGI) Plc were extended the stay of the NASD Over-the-Counter (OTC) Securities Exchange in the red region for another trading day, weakening the alternative stock exchange further by 0.13 per cent on Thursday, March 20.

Geo-Fluids Plc lost 15 Kobo to trade at N2.70 per unit compared with the previous day’s N2.85 per unit, Food Concepts Plc declined by 6 Kobo to close at N1.49 per share versus Wednesday’s closing price of N1.55 per share, and IGI Plc tumbled by 2 Kobo to settle at 37 Kobo per unit, in contrast to the 39 Kobo per unit it traded a day earlier.

As a result, the NASD Unlisted Security Index (NSI) went down by 4.36 points to close at 3,373.62 points, in contrast to the previous trading day’s 3,377.98 points.

In the same vein, the market capitalisation of the bourse depreciated by N2.51 billion to settle at N1.948 trillion compared with the preceding day’s N1.951 trillion.

During the trading session, the volume of securities traded at the bourse crumbled by 99.4 per cent to 201,873 units from the 31.3 million units recorded on Wednesday, the value of securities bought and sold by the market participants moderated by 97.7 per cent to N776,509.51 from the N33.3 million quoted a day earlier, and the number of deals carried out by investors decreased by 26.1 per cent to 17 deals from 23 deals.

When the market closed for the day, Impresit Bakolori Plc remained the most active stock by value (year-to-date) with 533.9 million units sold for N520.9 million, followed by FrieslandCampina Wamco Nigeria Plc with 13.0 million units valued at N505.1 million, and Afriland Properties Plc with 17.5 million units worth N359.5 million.

In the same vein, Impresit Bakolori Plc remained the most active stock by volume (year-to-date) with 533.9 million units valued at N520.9 million, trailed by IGI Plc with 69.9 million units sold for N23.7 million, and Geo-Fluids Plc with 44.1 million units worth N88.9 million.