Data from the Nigerian Stock Exchange shows that Nigeria’s pension index has recorded a gain of 54% between January 2017 and July 2017 alone.
The pension index consist of a group of 40 stocks which meet the requirements for pension funds investment in the country.
The index also closed the week ended July 28th with a gain of 6.1% and has also gained about 7.8% in July alone. Most of the stocks included in the pension fun index include stocks in the banking sector, oil and gas, insurance and industrial sectors. It also includes stocks in the consumer goods sector of the economy.
Nigerian stocks All Share Index have gained about 31% this year alone making it one of the best performing stock exchanges in the world this year. From a total market cap of about N9.1 trillion at the start of the year, the Nigerian stock market has gained over N3 trillion in market value closing at N12.7 trillion as at Friday.
What it means for pension fund contributors
For Nigeria’s 7 million pension fund contributors, a stock market that is on a bullish ride also translates to a likely increase of the value of their pension funds contributions. Pension Funds in Nigeria are only allowed a global portfolio limit of about 25% for investing in shares only. It is therefore likely that most of the pension funds would likely report increased capital gains this year.
It is important to add that an increase in the value of pension fund assets does not mean more cash will be paid to pension fund contributors or that they will earn any form of dividend. it just means that the money you have contributed as pension may have also added a significant value.
When you receive your pension slips at the end of this month from your PFA, you will likely see an increase in the value of your pension fund contribution this year compared to last showing that the improved performance in the stock market should have translated into modest gains for your portfolio as well.