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Market indices slump by 1.4% amid loss of investor confidence

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[FILES] Nigerian Stock Exchange (NSE)

• How pension fund operators invested N940b assets in banks, securities
• FG targets 36.6m Nigerians on micro financial strategy

It was another period of pullback at the end of last week’s trading on the equities sector of the Nigerian Stock Exchange (NSE), which resulted in the depreciation of the bourse’s All-Share Index (ASI) and market capitalisation by 1.38 per cent, to close the week at 27,146.57 points and N13.207 trillion respectively.

Similarly, all other indices finished lower with the exception of NSE Banking, NSE Pension, NSE Insurance, NSE-AFR Bank Value, NSE AFR Div Yield, NSE MERI Value, and NSE Industrial Goods Indices, which appreciated by 0.20 per cent, 0.84 per cent, 0.83 per cent, 1.56 per cent, 1.41 per cent, 1.64 per cent, and 0.59 per cent respectively, while the NSE ASeM index closed flat.

Analysts said the further drop in indices last week signaled the continuation of the confidence crisis amid low liquidity, a situation that is exacerbated by the call to nationalise South African businesses following the persistent xenophobic attacks on Nigerians.

It is worthy of note that MTN Nigeria, a South African company franchise and the biggest telecommunications company by the number of subscribers, is now the most capitalised stock on the NSE.

Foreign investors, who remain the dominant force in a market where domestic participation has remained abysmally low, are bound to take such a statement seriously.

The shallow domestic participation is despite numerous promises to grow the numbers by managements of the NSE and the Securities & Exchange Commission (SEC). Besides, foreign investors have remained cautious about investing in Nigeria, especially since the outcome of the 2019 election that returned President Muhammadu Buhari to the leadership of the country for four more years.

The Chief Research Office of Investdata Consulting Limited, Ambrose Omodion, said: “Investors should look to government’s policy direction as the market faced low liquidity problems in pre- and post-inauguration season, vis-à-vis market and economic fundamentals.

“The ongoing volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on the political space and ongoing quarterly earnings position and post-election market dynamics.”

Codros Capital Research also said: “Over the coming weeks, we expect the market to remain pressured, given global risk-off sentiments and weak domestic participation.

“Nonetheless, we note that valuations remain attractive, while price deteriorations have resulted in expected dividend yields on some stocks rising significantly.”

Analysis of last week’s trading showed that 1.101 billion shares worth N17.082 billion in 15,431 deals were recorded on the exchange, against 713.141 million shares valued at N13.295 billion that was exchanged in 16,237 deals during the preceding week.

The financial services industry (measured by volume), which led the activity chart with 752.440 million shares valued at N9.900 billion, traded in 8,519 deals, thus contributing 68.34 per cent to the total equity turnover volume.

The conglomerates industry followed with 93.204 million shares worth N239.250 million in 883 deals, while the construction/real estate industry trailed with a turnover of 65.808 million shares worth N66.730 million in 100 deals.

Trading in the top three equities namely, Guaranty Trust Bank Plc, Access Bank Plc, and Zenith Bank Plc (measured by volume) accounted for 530.372 million shares worth N9.096 billion in 3,604 deals, contributing 48.17 per cent to the total equity turnover volume.

Meanwhile, Pension Fund Operators (PFOs) have outlined how over N940 billion pension fund assets were invested in the operations of financial institutions and government debt instruments.

Going by the data obtained from the National Pension Commission (PenCom), the operators had, as at June 30, 2019, invested N940.68 billion out of the N9.33 trillion total pension fund assets in banks.

The commission noted that the operators also invested N105.05 billion in commercial papers, N1.82 billion in foreign money market securities, and N23.67 billion in mutual funds.

The pension industry regulator disclosed that investments in Federal Government of Nigeria securities amounted to N6.49 trillion, made up of N4.44 trillion in bonds, N1.94 trillion in treasury bills, N11.82 billion in agency bonds, N86.10 billion in Sukuk, and N12.13 billion in Green Bonds.

The data revealed further that N536.97 billion was invested in domestic ordinary shares and N129.60 billion in state governments’ securities. Corporate bonds got N486.25 billion; supra-national bonds, N6.03 billion; corporate infrastructure bonds, N11.49 billion; and corporate Green Bonds, N8.13 billion.

Others were Real Estate Investment Trusts (REITs), N14.37 billion; private equity fund, N31 billion; real estate properties, N250 billion; infrastructure funds, N29.17 billion; Open/close-end funds, N9.29 billion; and cash/other assets, N214.21 billion.

PenCom’s Acting Director-General Aisha Dahir-Umar said the Contributory Pension Scheme (CPS) has been very impactful in Nigeria since the commencement of its implementation in 2004. She added that the formation of long-term domestic capital, represented by the over N9.33 trillion pension assets as at June 2019, and belonging to nine million formal sector participants, is slowly, but surely changing Nigeria’s financial landscape.

Furthermore, the Federal Government has revealed plans to capture over 36.6 million Nigerian adults, representing 36.8 per cent of the working population, through the micro segment of insurance and pension sectors.

The figure includes self-employed citizens that are yet to officially embrace any form of financial services product.

Speaking to The Guardian in an exclusive interview during the fourth National Insurance and Pension conference organised by journalists in Lagos, stakeholders in both sectors said the majority of Nigerians in the informal sector are still unaware of the numerous benefits in embracing financial services products.

To ensure that every Nigerian has access to financial services, they said the Federal Government came up with micro insurance and micro pension products to penetrate the grassroots and get to those not currently registered in the CPS or covered by any form of insurance.

To achieve the agenda, Dahir-Umar said the commission would extend pension coverage to 30 million contributors by 2024, thus ensuring that 40 per cent of adult Nigerians are covered under the CPS.

Represented by the head of PenCom’s Benefit Administration Unit, Babatunde Philips, she said Buhari, in March 2019, launched the micro pension scheme to provide the informal sector with a veritable means of securing old age income.

She said the implementation of the Micro Pension Plan (MPP) would yield positive results for Nigerians and the pension industry and reduce old age poverty.

“The commission has put in place requisite infrastructure to facilitate seamless implementation of the MPP. The Enhanced Contribution Registration System (ECRS) has been deployed to facilitate seamless operations of the MPP. This system has so far aided the smooth registration of micro pension contributors,” she explained.

She also applauded the media for consistent support, saying it had assisted the commission by enlightening the public on the workings of the CPS and the commission’s activities.

Speaking further, Acting Commissioner for Insurance Sunday Thomas said the National Insurance Commission (NAICOM) has been doing a lot in terms of financial inclusion in the past eight years.

Thomas, who was represented by Leo Aka, the director, Governance Enforcement and Compliance, said collective effort was required to ensure that Nigerians in the informal sector embrace financial services.

Looking at demographics, Thomas said one would notice that the unemployment rate in Nigeria was high, and that this indicated the industry must move fast to capture people in the informal sector. He disclosed that the insurance commission had issued guidelines to ensure persons in the sector embrace financial services.

According to him, while establishing the micro insurance guidelines, the commission ensured that the products were easy to understand, affordable and valuable. He said two companies had so far been approved to underwrite micro insurance products. Two others are at the final stage of review while about seven are under review.


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