The net asset value (NAV) of the pension sector climbed from N19.67 trillion in the first quarter of 2024 to N20.48 trillion in the second quarter, a 4.14 percent rise (N814.92 billion).
However, according to data from the National Pension Commission (PenCom), the rise was less than the N1.31 trillion (7.16 percent) that was recorded in the first quarter (Q1) of 2024.
At the end of the second quarter (Q2) 2024, the net asset value (NAV) of the pension industry experienced a minor decline as a result of the decline in equity prices. According to PenCom, the decline was mostly caused by investment returns, specifically the decline in equity prices over the time frame.
“The decrease in the value of investments in domestic quoted equities was primarily due to the depreciation in the prices of some stocks during the reporting period, as the Nigerian Stock Exchange Pension Index (NSE-PI) depreciated by 2.26 percent in Q2:2024 relative to a significant appreciation of 38.50 percent in Q1:2024,” according to PenCom.
In the first three months of 2024, Pension Fund Administrators (PFAs) purchased Nigerian stocks valued at N550 billion, increasing their overall exposure to the stock market to N2.32 trillion as of the end of March. Equity investments increased by 31%, or N550 billion, from N1.77 trillion in December 2023.
The development, according to analysts at the Pension Fund Operators Association of Nigeria (PenOp), shows that pension funds are becoming more confident in the equity market.
In the first quarter of 2024, the N550 billion investment helped propel the stock market to its second-best return in Africa, a year-to-date return of 39.84 percent.
Despite the Central Bank of Nigeria’s (CBN) dramatic rate hikes this year, that market flourished. The benchmark interest rate was hiked by the CBN by a total of 600 basis points to 24.75 percent in 2024.
Companies incur higher interest costs as a result of higher interest rates, which has a detrimental effect on the stock market.
The development, according to analysts at the Pension Fund Operators Association of Nigeria (PenOp), shows that pension funds are becoming more confident in the equity market.
In the first quarter of 2024, the N550 billion investment helped propel the stock market to its second-best return in Africa, a year-to-date return of 39.84 percent.
Despite the Central Bank of Nigeria’s (CBN) dramatic rate hikes this year, that market flourished. The benchmark interest rate was hiked by the CBN by a total of 600 basis points to 24.75 percent in 2024.
Companies incur higher interest costs as a result of higher interest rates, which has a detrimental effect on the stock market.
He further claimed that foreign ordinary shares contributed to the rise. The value of foreign assets owned by closed pension fund administrators (CPFAs) increased by more than N118 billion as a result of the naira’s devaluation, which caused foreign assets to be revalued upward.
Fixed income instruments contributed significantly to this increase despite the success of listed stocks, both domestic and overseas.
“It has taken a long time, and nearly four years of positive equity returns from the Nigerian Exchange Limited (NGX), but it appears that Nigeria’s enormous pension funds are warming up to equities again,” analysts at Coronation stated in their Daily Weekly Update late last year.
“So, either Nigerian pension funds are excellent stock pickers, or they are net buyers of equities. We believe the significant increase in their equity position was the result of a mix of net acquisitions of up to N200.0 billion and prudent stock selection.”
