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Nigeria’s Fund Industry Remain Resilient Amid COVID-19 Concerns

COVID 19 has done some devastating damage to the economy, One industry in Nigeria that has remained resilient in spite of it all is the mutual fund industry. 

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Nigeria’s Fund Industry Remain Resilient Amid COVID 19 Concerns

There is no doubt that COVID-19 has done some devastating damage to various parts of the Nigerian economy and indeed, the world economy. Price of oil fell so much such that, buyers were figuratively or literarily being begged to buy, stock markets became jittery, unemployment rate spiked, the need for social services skyrocketed, the list goes on and on.

One industry in Nigeria that has remained resilient in spite of it all, is the mutual fund industry.  The health and wellbeing of the asset management industry is usually measured or gauged with trends in inflow, outflows, and total Net Asset Value (NAV).

Using those metrics as a measure of the extent to which the Coronavirus impacted the industry, one can say that the mutual fund industry in Nigeria is alive and well, and is defying all the odds against a virulent virus that visited the world with vengeance. Before the advent of COVID-19, early in 2020, the total asset value of Nigeria’s mutual funds stood at N1.042 trillion (according to the December 27th 2019 edition of NAV Summary Report from the SEC). Fast forward to May 15th 2020, after COVID-19 took hold on the world economy, the total net asset value of mutual funds in Nigeria has increased to N1.31 trillion. This represents an increase of N270 billion or 26%

Fund Flows: Of the N270 billion increase in asset value, N260.5 billion came from increase in net flows while N9.5 billion came from investments returns. The fact that the industry saw a positive inflow of that magnitude in periods where people were almost at the verge of dipping hands into their savings and investments is indicative of how resilient the industry has been. Although the industry was shaken by the effects of the virus and the trends in the oil market between March and April, it regained its strength towards the end of April and has since maintained a positive trend.

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Flight to Safety: In what looked like flight to safety, much of the positive fund flows went to Bond Funds and Money Market Funds. While Money Market Funds recorded a year to date net positive flow of N97.5 billion, Bond Funds generated N110.4 billion in net inflows. This is the first time any fund category is generating more positive flows than the Money Market Fund category. The reason could be because yields on bond funds are slightly better than what is obtainable from money market funds. Eurobond funds, recorded N12 billion in positive net flows while Infrastructure fund category saw N27 billion come in.

(READ MORE: What you need to know as banks rebrand CBN intervention funds to woo borrowers)

Performance Indicators: In an apparent justification for the flight to safety, almost all funds under the equity fund category made losses except ACAP Canary Growth fund and PACAM Equity fund. In all, that category of funds has lost an estimated N1.2 billion within the period under review. On the other hand, only 6 out of the 21 Bond funds made losses as that category of funds gathered an estimated gain of N3.5 billion. Eurobond funds seem to be basking in the euphoria of Naira devaluation as they gain massively from what is lost from the value erosion in the Naira. The Eurobond category generated an estimated N9.8 billion from January to May 15th 2020. It does look like this category of fund may be a good hedge against Naira devaluation. Much of the gains however, came from Stanbic IBTC Dollar fund and United Capital Euro Bond fund.

Nigeria’s Fund Industry Remain Resilient Amid COVID 19 Concerns

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Though there are pockets of gains by some funds, most of the categories made lose within the period under review, arising mostly from their increased exposure to the equity market.

Elsewhere in the World: This trend does not seem to be peculiar to Nigeria. Recent news from Canada indicates that Canadian Pension Plans defied the COVID-19 menace and added $17 billion to increase the total net asset value to $409 billion, as at March 31st 2020. Like the Nigerian mutual fund industry, $5.5 billion of the increase in Canada’s pension plans came from contributions or net flows while $12.1 billion was as a result of positive performance.

Future Expectations: The year 2020 is still too young and the world economy too volatile for credible prediction, one can therefore not say with great certainty if the yield driven funds like the Bond Funds and Money Market Funds will maintain the momentum in generating positive gains. In terms of generating positive net flows, it does look like that trend will continue till the end of the year when it becomes clearer what direction the world economy will be heading to following the devastating effects of COVID-19. Until then, we are watching.

 

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  • This analysis is based solely on data obtained and obtainable from the Security and Exchange Commission, Nigeria

 

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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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Coronavirus

Covid-19: Buhari approves N6.45 billion to set up 38 oxygen production plants

President Buhari has approved the sum of N6.45 billion for the set-up of 38 oxygen production plants across the country.

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President Muhammadu Buhari has announced his approval of N6.45 billion for the set-up of 38 oxygen production plants across the country, in a bid to contain the second wave of Covid-19.

The President disclosed this in a statement on Thursday evening after the first National Economic Council meeting of the year presided over by Vice President Yemi Osinbajo, SAN, with State Governors, Federal Capital Territory Minister, Central Bank Governor, and other senior government officials in attendance.

READ: Covid-19: FG directs universities to suspend academic activities till further notice

“As part of efforts to contain the second wave of Covid-19, we’re setting up new oxygen production plants in 38 locations across Nigeria—to enhance the management of patients in need of oxygen.

“I have equally approved funding for the rehabilitation of oxygen plants in 5 hospitals,” Buhari said.

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The Minister of Finance, Budget and National Planning, Zainab Ahmed said the President said the fund’s release was necessitated by the rising cases of Covid-19 in the country with patients needing oxygen.

READ: Toyota suspends operations in China over Coronavirus outbreak 

What you should know 

  • Recall Nairametrics reported that the Lagos State Governor, Babajide Sanwo-Olu, warned that the rising second wave of the pandemic in Lagos had seen the demand for oxygen rise 5 times from 70 six-liter cylinders per day to 350 six-liter cylinders at Yaba Mainland Hospital alone.
  • He added that the state government had the decentralized provision of oxygen and other services needed for Covid-19 patients, citing the provision of oxygen kiosks.

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Around the World

President Biden directs international air travelers must quarantine upon arrival

President Joe Biden has directed international air travellers to quarantine upon arrival in the United States.

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The United States President Joe Biden has issued an executive order on Thursday that makes it mandatory for international air travellers to quarantine upon arrival in the US.

Similarly, the executive order also includes a directive that all interstate travellers in the US will be expected to wear a face mask. This travel order applies to airports and planes, trains, ferries, intercity buses and public transportation, but grants them the ability to issue exemptions.

READ: Here is reason Turkish Airlines was allowed to land in Abuja 

What the US President is saying in the executive order

According to a report from Reuters, President Biden’s order says, ‘‘To the extent, feasible air travellers must comply with applicable U.S. Centers for Disease Control and Prevention (CDC) guidelines concerning international travel ‘including recommended periods of self-quarantine.

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However, the executive order does not explain how it will be enforced as the implementation still remains quite hazy.

READ: A Joe Biden presidency and its impact on Nigeria’s oil

The order also directs US agencies to engage with Canada and Mexico on public health protocols for land ports of entry including implementing CDC guidelines. Almost all non-essential travel at US land borders with Canada and Mexico has been suspended till February 21.

The CDC recommends a 7-day quarantine for people arriving in the United States from nearly all countries.

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READ: Biden reverses US immigration ban on Nigeria, others

Biden is directing agencies to reconsider international contact tracing requirements for U.S.-bound passengers, which was abandoned by the Trump White House, as well as the possibility of follow-up Covid-19 testing for travellers after they arrive in the United States.

In addition, the US President has also directed that all travellers including US citizens, will be required to show proof of a negative Covid-19 test before entering the country from abroad in an order that underscores the CDC policy announced last week.

READ: Air travellers across Nigerian Airports hit 8.5 million in 6-month

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What you should know

  • It can be recalled that the Trump administration had resisted calls for the enforcement of a mask-wearing requirement.
  • The Biden administration has also announced that it would reimpose coronavirus-related ban on most non-U.S. citizens arriving from European Union, Brazil, the United Kingdom.
  • This follows the lifting of the restrictions by former US President, Donald Trump through an executive order on Monday.

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Coronavirus

FG to take delivery of first set of Covid-19 vaccines in February

The FG has announced that the country expects to take delivery of its first set of Covid-19 vaccine doses in February.

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Covid-19: First world nations oppose waiving intellectual rights for vaccine development

The Federal Government has announced that the country expects to take delivery of its first set of Covid-19 vaccine doses in February, with health workers, vulnerable people and top government officials to be given priority.

These vaccines are expected to be procured through the Covax initiative which is backed by the World Health Organization (WHO), Gavi the Vaccine Alliance, and the Coalition for Epidemic Preparedness Innovation.

According to a report from Bloomberg, this disclosure was made in an interview by the Executive Director/Chief Executive of the National Primary Healthcare Development Agency, Faisal Shuaib, who said that as many as 100,000 doses of the Pfizer Covid-19 vaccine, would be purchased.

What the Head of the National Primary Healthcare Development Agency is saying

Shuaib said that the first batch of the vaccines,  which is enough for a maximum of 50,000 people, equivalent to about 0.00025% of Nigeria’s population, would be allocated to health-care professionals working in Covid-19 isolation centres and those supporting them, as well as the country’s senior political leaders.

He said, “We are waiting for final confirmation from Covax on when the first doses will arrive. A most recent indication is they’re expected in February.”

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What you should know

  • It can be recalled that the Federal Government, had initially announced that it was expecting the first set of Pfizer Covid-19 vaccines to be available at the end of January through the Covax initiative.
  • The Minister of State for Health, Olurunnimbe Mamora, had also said that the country was yet to purchase any Covid-19 vaccine as the country was still assessing the prices of different shots, their availability and the logistics required for a nationwide roll-out.
  • Shuaib revealed that the Federal Government had acquired 3 ultra-cold freezers to keep the Pfizer vaccines at the required temperature. He said that in the longer term, the government planned to invest in vaccines that were easier to store, such as those created by AstraZeneca Plc, and the University of Oxford.
  • Nigeria, with a population of more than 200 million people, plans to vaccinate about 70% of its population in the long run and is working on other options, besides Covax, for supplies.

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