Nigerian Pension Fund Administrators (PFA) have increased their investments in the local stock market as investments hit the N1 trillion mark, increasing by N8.73 billion compared to N999 billion recorded as of the previous month.

Year-to-date, the investments by the pension managers in the local bourse have grown by N92.43 billion from N915.31 billion recorded as of the beginning of the year. This is according to information in the unaudited report of the pension funds industry for the month of May 2022.

In the same vein, the total asset under management rose to its highest level at N14.19 trillion, having gained N133.76 billion in the review month, and N768.86 billion between January and May 2022.

The number of RSA registrations also increased to its highest level to stand at 9.67 million registrations as of May 2022, this represents an increase of 25,025 compared to the previous month.

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

The market capitalization also increased by N1.8 trillion to close the month at N26.8 trillion, lifted 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 stand at N1.19 trillion in May 2022. Some of these investments include corporate bonds, infrastructure bonds, and green bonds.
• On the flip side, investments in local money market securities reduced by 2.98% to N2.19 trillion from N2.25 trillion recorded as of April 2022.
• The investments in local money market instruments included fixed deposit/bank acceptance and commercial paper issuances.
• A look at the breakdown of the report showed that the RSA fund II accounted for most of the fund contribution with N6.21 trillion, representing 43.8% of the total pension assets under management.
• The RSA Fund III followed with N3.83 trillion, accounting for 27% of the total assets. Also, the fund III category increased by N52.5 billion month-on-month in the review period.
• Existing schemes accounted for 10.1% of the total funds, increasing by N5.25 billion to stand at N1.43 trillion.
• Also, the CPFAs accounted for 10.7% of the total funds, standing at N1.52 trillion as of the review period.

Investments in government securities also increased by N245.45 billion in the period under review to stand at N8.81 trillion, accounting for 62.1% of the total asset. Investors are now looking into government safe-haven assets such as federal government bonds, treasury bills, agency bonds, Sukuk, and green bonds, due to the volatility across various investment portfolios.

Despite the negative real yield of government instruments, investors are still oversubscribing. The recent Central Bank Treasury Bills issuance for a one-year tenor was oversubscribed by a whopping 527% in June despite a negative real yield of 11.6% against an inflation rate of 17.71%.

Although the Nigerian stock market has witnessed a stellar year-to-date performance, the local bourse is beginning to feel the effect of the hike in interest rates across notable economies in the world in Nigeria.

A month-to-date analysis of the All-Share Index shows that the market has shed 3.04% so far in the month of June 2022, which could suggest that bearish sentiments is beginning to take a hold of the local market.

[Nairametrics]