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Debt Securities

Nigeria’s pension contributors add N100billion to pension asset

Pension fund assets in Nigeria increased by N90 billion and N10 Billion for the months of July and August respectively to push the total pension assets to N8.33 trillion

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Pension Funds Performance

Pension fund assets in Nigeria increased by N90 billion and N10 Billion for the months of July and August respectively to push the total pension assets to N8.33 trillion, an increase of 1.22% over its June 2018 asset value.

This is according to analysis of the Summary of Pension Fund Assets recently released by the National Pension Commission.

The analysis conducted by Quantitative financial Analytics indicates that there was a reallocation of funds from the previous RSA fund category, now known as Fund 2 which saw about N1.8 trillion flowing out to the newly inaugurated Fund 3 which received an almost equal amount of inflows. Because of the reallocation, RSA Fund 2 which stood at N5.5 trillion by the end of Q2, 2018 now stands at N3.7 trillion while Fund 3, with N1.96 trillion asset value is now the second largest category.

It will be recalled that on July 1, 2018, the National Pension Commission, PENCOM, began the implementation of its multi structure system.

Fund one is for young contributors based on choice. However, it does not look like many people have opted for this fund one as its asset value stood at N4.5 billion. Surprisingly, fund 3 which is meant for contributors in their pre-retirement stage and aged 50 years and older is the second largest fund by asset.

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The seemingly lack of interest in the fund 1 seems to demonstrate that pension contributors are either too risk averse or are still to understand the implications of the multi fund structure. Though it is too early to judge the success of the newly introduced fund structure, if the trend of lack of interest in Fund 1 continues, the aim of the fund structure may not be realized.

Asset Allocation

Pension funds are still over weight government fixed income securities as 68% of pension fund assets are invested in FGN Bonds and Treasury bills. When investments in Corporate debt securities (4.89%) as well as State Government securities (1.85%) are added to investments in FGB Bonds and Treasury bills, it become obvious that the Nigerian bond market is being driven by pension funds.

In total, about 75% of pension fund assets are invested in fixed income securities which leave Nigerian pension funds heavily exposed to interest rate risk.

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Exposure to equities remains very minimal as only 7.56% and 0.77% of pension assets are invested in Domestic and Foreign equities respectively.

Happily, not much of pension fund assets are invested in illiquid or thinly traded asset classes like Private Equity and Infrastructure funds as just 0.46% and 0.19% of total pension assets are in those asset classes.

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Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.

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Debt Securities

DMO offers N150 billion worth of FGN Bonds for subscription

FGN Bonds are backed by the full faith and credit of the Federal Government of Nigeria.

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Debt Management Office resumes FGN savings bond offer on August 10, Eurobonds, Patience Oniha, DMO, External debt servicing

The Federal Government on Tuesday, 11th August 2020, through the Debt Management Office (DMO), offered for subscription Federal Government Bonds (FGN Bonds) valued at N150 billion.

The FGN bonds are listed in four tranches that include:

  • N25,000,000,000 – 12.50% FGN JAN 2026 (10-Yr Re-opening)
  • N40,000,000,000 – 12.50% FGN MAR 2035 (15-Yr Re-opening)
  • N45,000,000,000 – 9.80% FGN JUL 2045 (25-Yr Re-opening)
  • N40,000,000,000 – 12.98% FGN MAR 2050 (30-Yr Re-opening)*

READ: UBA reports a 13.3% profit increase in audited FY 2019 financial statement

Auction Date: August 19, 2020

Settlement Date: August 21, 2020

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Summary Of The Offer

Issuer: Federal Government of Nigeria (“FGN”)

Units Of Sale: N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter.

Interest rate: For Re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date.

READ ALSO: Nigeria’s Eurobond yield hit 12.8% as investors flee emerging markets

Interest payment: Payable semi-annually.

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Redemption: Bullet repayment on the maturity date.

Status:

  1. Qualifies as securities in which trustees can invest under the Trustee Investment Act
  2. Qualifies as Government securities within the meaning of Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds amongst other investors
  3. Listed on the Nigerian Stock Exchange
  4. All FGN Bonds qualify as liquid assets for liquidity ratio calculation for banks

Security: FGN Bonds are backed by the full faith and credit of the Federal Government of Nigeria and are charged upon the general assets of Nigeria

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Understanding Bonds: A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental).

A bond could be thought of as an I.O.U. between the lender and the borrower that includes the details of the loan and its payments.

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A bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower.

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Debt Securities

DMO announces August 2020 FGN Savings Bond offer for subscription

The FGN Savings Bond is backed by the full faith of the Federal Government of Nigeria.

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Debt management office, DMO,Nigeria's Debt to revenue ratio, DMO suspends April 2020 FGN savings bond offer

The Debt Management Office (DMO), on behalf of the Federal Government of Nigeria, recently offered for Subscription the August 2020 Federal Government of Nigeria Savings Bond.

The Federal Government of Nigeria Savings Bond is an investment product issued through the Debt Management Office (DMO) on behalf of the Federal Government.

The FGN Savings Bond is backed by the full faith of the Federal Government of Nigeria. As such, it is deemed to hold no default risk (Zero-Based Risk).

READ MORE: FG makes U-turn on Eurobonds, says it will issue some more

This is, therefore, to inform you that the Federal Government of Nigeria Savings Bond offer(s) for the month of August – 2020 has commenced on the 10th of August, 2020. It will close on the 14th of August, 2020.

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It consists of two (2) tenors:

2-Year FGN Savings Bond due August 12, 2022: 3.61% per annum

3-Year FGN Savings Bond due August 12, 2023: 4.61% per annum

Please find below additional information to guide your application:

Unit of Sale: N1,000 per unit subject to a minimum subscription of N5,000.00 and in multiples of N1,000.00 thereafter, subject to a maximum subscription of N50,000,000.00.

READ ALSO: Nigeria needs $100 billion annually to fix infrastructural deficit – Finance Minister 

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Coupon Payment: Payable every quarter with principal repayment at maturity.

Settlement Date: August 19, 2020.

Coupon Payment Date: November 19, February 19, May 19, August 19

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Security: The Federal Government of Nigeria Savings Bond is backed by the full faith and credit of the Federal Government of Nigeria (FGN).

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Debt Securities

Debt Management Office resumes FGN savings bond offer on August 10

The DMO assured that the Bond offers were going to resume when the conditions change.

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Debt Management Office resumes FGN savings bond offer on August 10, Eurobonds, Patience Oniha, DMO, External debt servicing

The Debt Management Office (DMO) has announced the resumption of its Federal Government of Nigeria (FGN) Savings Bond Offer with effect from August 10, 2020.

This disclosure was made in a press statement by the Debt Management Office to the general public.

The DMO was earlier forced to suspend the monthly offers of the FGN Savings Bond in April 2020, due to the lockdown and restrictions placed on social and economic activities as part of measures implemented by government to contain the spread of the Coronavirus pandemic.

READ ALSO: FG responsible for 80% of Nigeria’s N25.7 trillion debt profile 

The statement from the Debt Management Office said:

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“The DMO wishes to announce the resumption of its offer of the federal government of Nigeria savings bond (FGN savings bond) effective August 2020.

“The DMO was constrained to suspend the monthly offers of the FGN savings bond in April 2020 due to the restrictions on activities and movement as part of measures adopted by the government to curtail the spread of COVID-19.

“The offer for subscription will open on Monday, August 10, 2020 and close on Friday, August 14, 2020.’’

READ ALSO: State Governors parted with N33.9 billion to external debt deductions

The statement also encouraged investors to continue to save through the FGN Savings Bond. This is because FGN Savings Bonds attract good returns and are secure, being a Sovereign instrument. They also contribute to national development.

Nairametrics had on April 4, 2020, reported the suspension of the FGN Savings Bond offer by DMO which was scheduled for April 6 –April 10., due to the restrictions caused by the coronavirus pandemic.

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The DMO assured that the Bond offers were going to resume when the conditions change.

The DMO, however, noted that the suspension of the April 2020 Offer would not affect Coupon Payments due to investors for already issued FGN Securities, as arrangements had been made to ensure that all Coupon Payments for and redemptions of FGN Securities were made as and when due to investors’ designated accounts.

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