The Nigerian Stock Exchange released its 2017 first half review of its major indices on Tuesday. Of particular interest to us was the NSE Pension Index, which comprises of stocks typically purchased by Pension Funds. Let’s explain why this is of interest to us.

The Pension Index comprises of 40 companies which are included in the portfolio of Pension Funds. Pension Funds in Nigeria are currently the single largest local investors in the N9 trillion market cap Nigerian stock exchange. As such, stocks that make it to their portfolio is a signal to the market of their liquidity, appreciable fundamentals and track record of paying dividends.

These are three of the most important ingredients of the good stock, at least from the perspective of pension funds. Another reason why this index is closely followed by Pension Funds is because since they are not allowed to buy every stock on the exchange so it makes sense for each PFA to benchmark themselves against a special index rather than against the wider All Share Index.

What is in it for stocks.

In its latest review, the Nigerian Stock Exchange yanked off Beta Glass Co. Plc, International Breweries Plc, Skye Bank Plc and replaced them with United Capital Plc, Ecobank Transnational Inc, Dangote Flour Plc. The implication is that the three stocks newly added will likely attract significant interest from Pension Funds.

Of the three, we take particular interest to United Capital Plc. The company has just come off a remarkable 2016 where it was among the top 5 performers for the year. The company also reported impressive profitability growth and has been a consistent dividend paying stock with impressive yields. We see the share price gaining another 15-20% before it gets marked down again for dividends. Dangote Flour Mills is also a surprise for us. Since the retake of the company by Alhaji Aliko Dangote’s DIL, the stock has outperformed all stocks in the index. It gained a whopping 286%  in 2016 alone.

What is in it for retail investors

For retail investors, the Pension Index provides them with an index they can decide to mirror in their portfolio. Since Pension Fund Managers are rated on their ability to outperform this index and the wider All Share Index, the stocks in this index are carefully handpicked and have more chances of providing positive returns.

But it hasn’t been all rosy for the Pension Index. Last year, the index returned -0.3% compared to -6.17% return of the All Share Index. The Pension Index returned -18.96% in 2015 compared to -17.36% return of the All Share Index.

As a retail investor, you still need to do your home work very well and pick stocks that suit your investment style. If you are a buy to hold investor then avoid stocks with huge volatility and liquidity. That, is stocks that get traded on high volumes. However, make sure that they have sound fundamentals. If you are a short-term investors who buys to sell then make sure you buy stocks with good liquidity but with sound technicals.



  1. This pension reform done by the previous administration of chief obasanjo was done by the govt to free the govt from it’s pension obligations,but the govt can do better.In Britain and usa all have a social security number,where in brtain,apart from income tax,you are deducted some from your income, lesser than your income taxee,which goes towards your unemployment benefit,when you’re unemployed,incapacity benefit,which is paid to you when you’re sick,if your employer cannot pay any income,because it’s not covered by your employment contract,as you get older is you not have a private pension cover the state will pay you some amount as state pension.
    In usa to push for mass and cheap/comfortable homes,they built houses project estate,In England most lga owns homes,built for low-income people and rent are subsidized,most of those local govt homes were built after the 2nd world war,aimed to clear all slums or reconstruct the nation after the usa,they created 2 fed agencies,which funds local govt areas,with specific instruction and rules, to fund and regenerate depressed area,and in recent report they have funded more than 12 trillion us dollar so far,through guarantee money,but some us investment bank hijacked this fund in pooling those funds to make profit.
    To balances the economy,in some’s possible for govt to allocate some fund,through the discretionary powers of the pension regulators,to home builiding companies or those in REIT called real estate investment trust,who pools fund together and invests in real estate,so it’s possible for fed govt give more powers to the federal mortgage bank of Nigeria,gives funds directly to home building companies and real estate investment trust or those private investor who have the capacity and abilities to built homes across Nigeriai.e for govt to gets their money back,which I think will move the economy faster and faster.the vice-president have said that was a plan for the govt to allocate funds to FMBN.which I think they said 10 billion naira.i do not think,it will be enough.i think Nigeria need about 10 trillion naira to about 20 trillion,to meets it’s demand

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