How negative performance in the capital market affected PFAs in 2019 

The Director-General of the National Pension Commission (PenCom), Aisha Umar-Dahir, has spoken about how the operating environment for Pension Funds Administrators (PFAs) was made difficult in 2019 due to the absence of viable investment opportunities.

According to her, pension administrators faced a considerably challenging 2019 due to the negative performance of the NSE All-Share Index which made it difficult for PFAs to find eligible stocks to invest in. However, they tried to resort to other alternative investments, she said.

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“The operating environment has been quite stable with the exception of the investment horizon, which has been significantly affected by the downturn of economic indices. This has affected the universe of eligible securities and marked a major shift away from the Capital Market due to the significant decline of the All Share Index. This challenge has encouraged the Commission to intensify its efforts at encouraging eligible alternative investments by the PFAs.”

Note that these other alternatives Mrs Dahir referred to included huge investments by the PFAs in FGN securities which. Interestingly, these investments recorded high yields, altogether growing the pension assets by N1.27 trillion in ten months.

“Pension assets had grown by an average of N117 billion on a monthly basis between January and October 2019. This was possible despite the economic conditions in the country. The actual size of the assets was N8.64 trillion as at 31 December 2018, which grew to N9.81 trillion as at 31 October 2019. This shows that the assets had grown by N1.27 trillion in 10 months. Indeed, the growth was achieved due to heavy exposures of the PFAs in FGN securities and the relatively very high yields during the year, while investments in equities came down to just below 5 per cent in October due to the prevailing performance of the stock market indices.”

[READ MORE: NSE highlights the importance of the capital market in achieving SDGs)

The PenCom boss further told Daily Trust that registration for the Retirement Savings Account has continued to increase by an average of 40,000 new registrators every month. As of October, ending, about 8.8 million people have registered. And even though this is a far cry from the 20 million target that was set for 2019, Dahir noted that it is still something.

Despite the efforts being made by PenCom to position Nigerian pension assets for success, there is still a major problem posed by rising inflation. Recall that a recent article by Nairametrics mentioned how the persistent depreciation in the value of the Naira has eroded the value of Nigeria’s pension assets by as much as 100% between 2012 and 2019.

Unfortunately, high inflation rate continues to be a major problem for the Nigerian economy in the meantime. The latest inflation report by the National Bureau of Statistics showed that the country’s inflation rose to 11.85% in November.