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Business News

Pension fund administrators pile up cash in anticipation of withdrawals

Pension fund administrators pile up cash in anticipation of withdrawals

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Nigerian Pension Fund

Data from the National Pension Commission of Nigeria, PenCom, shows that the asset value of pension funds in Nigeria witnessed a growth of 3.27% in the second quarter of 2019. The total asset value of Nigeria’s pension fund administrators, which stood at N9.03 trillion as at the end of the first quarter, increased to N9.325 trillion by the end of June 2019, according to data from PenCom.

Analysis of the said data carried out by analysts at Quantitative Financial Analytics indicates that pension fund administrators together had about N578 billion in contributions and N283 billion in redemptions, leaving it with a net increase of about N296 billion to bring its Q2 total asset value to N9.325 trillion.

Asset Reallocation

The same analysis shows that there might have been some sort of divestment or asset rebalancing that took place among the various asset classes that the administrators invest in. The asset class that got affected most, on the negative side, is investment in foreign money market securities which fell by a whopping 92% from its Q1 balance of N22.5 billion to N1.8 billion by June ending.

[READ MORE: Federal Government increases borrowing from Pension Funds]

pension

Pension fund managers tend to be falling out of love with mutual funds as their investments in open/closed end funds fell by 13%, from N10.6 billion (March 2019) to N9.3 billion as at the end of Q2. Other asset classes that suffered allocation shrinkage include:

FGN Bonds, which fell by 0.45%, or about N20 billion,

Infrastructure funds, by 0.77%,

Agency Bonds, 1.16%,

Private Equity funds, 2.48%,

Sukuk bonds, 8.51%,

Domestic ordinary shares, 9.8%, and

State Government bonds, 10.19%

The rebalancing or asset reallocation notwithstanding, the overall asset allocation structure of the industry still remains intact with 47.6% of assets in FGN Bonds (N4.4 trillion), and 20.8% or N1.94 trillion in Treasury Bills.

[READ MORE: Things you should know before starting a business]

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Cash Pile Up

Our analysis indicates that most of the realizations from the “divested” or shrunk asset classes are being kept in cash. Cash and other assets, as an asset class, grew by 751% in Q2, from N25 billion in Q1 to N214 billion, in Q2. This is the highest cash position by pension fund administrators since Quantitative Financial Analytics began monitoring and analyzing pension assets in Nigeria, over 5 years ago.

A deeper analysis indicates that the stashing away of cash occurred across almost all pension fund categories. While CPFAs increased their cash holding by 491%, from N661 million to N3.9 billion, Retirement Savings Account, RSA Fund 2, increased its cash balance by 1598% from N7.3 billion to N124.5 billion. In the same way, Retirement Savings Account, RSA Fund 3, saw its cash balance increased by 3686% from N1.8 billion to N70 billion, but Retiree Savings Account, Fund 4, had an increased cash balance of 225% from N4.2 billion to N13.8 billion.

It does appear, therefore, that all the pension fund categories, except Fund 1, stockpiled cash in the second quarter of the year. The stockpiling of cash could be in anticipation of withdrawals by retirees and other stakeholders. It could as well be a strategy to wait for profitable investment opportunities that may crop up, as they usually do, every now and then.

Another reason for the perceived cash accumulation maybe because of failing yield that is being witnessed in the Nigerian economy which is decreasing the allure of bonds and treasury bills. Whatever the reason for accumulating cash by the pension fund managers, it does look like they are beginning to demonstrate that “cash is king.”

[READ MORE: OPay secures $50 million capital raise from Chinese investors]

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Energy

Agip shut oil facility in Bayelsa due to oil spillage, environmental pollution reported

Agip on Wednesday confirmed an oil leak, resulting in a shutdown.

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The Nigerian Agip Oil Company (NAOC) has confirmed the shutdown of its Idu oilfields at Egbebiri settlement within Biseni in Yenagoa Local Government Area in Bayelsa, due to an oil spillage.

A Joint Investigative Visit (JIV) report on the incident said that the leakage at the facility could be traced to equipment failure due to a rupture at the wellhead.

According to a report from the News Agency of Nigeria (NAN), Eni, the parent company of NAOC, in a response statement, said the facility was shut down to prevent further damage to the environment.

What Eni is saying

An Eni Spokesperson on behalf of the Italian Energy firm, in a statement said, “As soon as the incident was reported, we activated our oil spill response, shut in the well and notified government regulatory agencies.

“The Joint Investigation Visit (JIV) was carried out on 09/05/2021, with participation of community representatives and the government regulatory agencies.

“The event occurred within the Company’s well head location which is paved and walled round. There is no significant third party impact,” Eni stated.

Environmental Rights Group reports environmental degradation

An environmental rights group, Environmental Rights Action/Friends of the Earth Nigeria (ERA/FoEN), however, said that the incident which discharged crude and associated gas had severely polluted the environment.

The Non-Governmental Organisation said that a visit to the spill site showed pictorial evidence of the crude spreading beyond NAOC’s right of way as nearby vegetation were affected as a result of the crude impact.

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The Head of Field Operations at ERA/FoEN, Mr Alagoa Morris, in a field report on the spill said the Idu fields was notorious for frequent spills caused by equipment failure.

He said, “The people of Egbebiri in Biseni kingdom have experienced several oil spills over the years. And all the oil spill incidents documented by the Environmental Rights Action/ Friends of the Earth Nigeria (ERA/FoEN) in this community environment have occurred as a result of equipment failure and on Wellheads.

“ERA/FoEN has had cause to visit the environment of Idu Well 5 and 11 located within the same place in the past and it has always been Idu Well 11 spewing crude oil into the environment.

“Available records from ERA/FoEN indicate that there have been previous oil spills from this particular Idu Well 11 operated by Agip. Before concluding this Field Report, ERA/FoEN confirmed that Joint Investigation Visit (JIV) was carried out on Sunday, 9th May 2021.

“This is why the official Spill Reference No 2021/LAR/028/058 is indicated in this report; sourced from the JIV report. Cause of spill was attributed to equipment failure,” ERA/FoEN stated.

The report quoted a resident of the community simply identified as Georgie as saying that the spill incident of May 7 spilled oil from around 10 p.m till about 8 a.m the next day before the leak was stopped adding that the level of damage was enormous.

What you should know

It can be recalled that in a similar circumstance, Shell Petroleum Development Company reported an oil pipeline spillage at its Okordia-Rumekpe 14-inch crude truck line, discharging about 213 barrels of crude oil into the Ikarama community in Bayelsa State and polluting about 1.34 hectares of land.

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This new leakage is the latest in a series of oil spillages by the multinational oil exploration and production companies, which has put them in conflict with the host communities.

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Energy

Nigeria records system collapse during holidays

Nigeria’s national electricity grid collapsed on Wednesday morning.

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Abuja, Ikeja Discos top list in collection efficiency in Q1 2020- NERC, Estates in Lekki increase electricity tariff to N105/kWh, Eko Electric, Ikeja and 5 others to face NERC sanction for non-compliance, CBN reveals framework for financing National Mass Metering Programme (NMMP), Nigeria ranks eight African country with well-developed electricity regulatory frameworks, as Uganda tops.

The Nigerian grid has experienced a partial collapse, dealing a blow for stay at home Nigerians during the holidays.

This was confirmed in a statement by the Eko Electricity Distribution Company (EKEDC), as seen by Nairametrics.

What EKEDC is saying about the grid collapse:

“Dear customer, there is a partial system collapse on the National Grid. Our TCN partners are working to restore supply immediately. Please bear with us.”

According to latest reports, partial restoration of power is already occurring across the country.

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