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COVID-19: N511bn pension fund investment in stock market at risk amidst foreigners’ exit

An estimated five  per cent National Pension Fund (NPF) amounting to over N511 billion invested in the capital market on behalf of the contributors may be at risk with the exodus of foreign investors  who left the country in the wake of the coronavirus pandemic.

The foreign investors  who  sources said, may not come back to Nigeria even  after the end of the pandemic, withdrew their investment  at the behest of their home governments, a situation that may have put Nigeria’s over N10.22 trillion pension funds on the cliff.

But the spokesman of National Pension Commission (PenCom), Mr Peter  Aghahowa, said that although the withdrawal could have had an  effect on the pension funds, the amount of investment in the stock  market is limited, stressing there was no cause for alarm.

“I don’t know whether you are familiar with our investment guidelines? The  pension funds investment is highly regulated. So, the percentage of the pension fund that is going into the stock market is also limited.

So, if there is volatility in the stock market, the other areas where the pension funds were invested will balance out. I am not saying that it would not  have an effect, but there is also that balancing mechanism in there. It would have been more of an impact, may be,  if you have 70 per cent or 80 per cent of all the funds in the stock market. But if you look at the portfolio allocation of the pension funds, it is a little fraction. Not everybody (pensions fund administrators)  has gone up to  five per cent. Some Pension Funds Administrators (PFAs) have one per cent in the stock market while some have two per cent. So, the volatility in the stock market will not significantly affect the pension funds even if the foreign investors pull out” he said.

When Daily Sun sought the position of Securities and Exchange Commission (SEC) on the matter, the spokesperson of the commission, Mrs Efe Ebelo, told the reporter to send his  enquiries in a text message. He did.  But until  the time of filing the story, Ebelo could not revert with her response.

Pension funds are investment pools generated forworkers’ retirement and entitlemets. Funds are paid for by either employees, employers, or both. Corporations and all levels of government provide pensions while companies reduce pension fund risk by relying on fixed income strategies.

Until relatively recently, pensions funds were invested primarily in stocks and bonds-using a liability-matching strategy. Today, they are  increasingly invested  in a variety of asset classes including private equity, real estate, infrastructure, and securities like gold that can hedge inflation.

Meanwhile,  Foreign Affairs Minister, Geoffrey Onyeama has defended the foreign investors exit from the market stressing they (foreigners)  left because they are more familiar with the health systems in their home countries. Onyeama said that not all the foreign nationals evacuated the country adding that  some of them including the citizens of US, the UK, Israel and member states of the European Union are still in Nigeria without any plan to leave.

 

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