By KAYODE TOKEDE, Lagos
Pension Fund Administrators (PFAs) and Foreign Portfolio Investors (FPI) are set to revive Nigeria’s capital market with huge capital inflows as they await the guidelines from National Pension Commission (PenCom) and the Securities and Exchange Commission (SEC) on divestment of their variable income assets classes to equities and others.
LEADERSHIP findings indicate that the Nigeria Stock Exchange (NSE) is looking for this development as it expects that part of the N6.5 trillion pension funds would be deployed to various investment products available on the exchange. A reliable source at the NSE said some PFAs have already started taking position in the equities market ahead of the full implementation of this policy in weeks ahead.
The source also hinted that the Central Bank of Nigeria (CBN’s) new special foreign exchange window dedicated to investors and exporters has impacted positively on the equities market in recent weeks.
The managing director, AXA Mansard, PFA, Mr. Dapo Akinsanya, yesterday, told LEADERSHIP that the circular stipulates divestment of minimum exposure to variable income assets classes in which equities market is a typical example. He said PFAs exposure to variable income assets classes like the equities market will bring positive growth to the NSE.
Also, LEADERSHIP findings has revealed that foreign portfolio investors (FPI) have been trickling in into the nation’s capital market after the CBN introduced special foreign exchange window dedicated to investors, exporters and end users.
For instance, the equities market between May 1 and 19 recorded unbroken capital gains, and sustained the bullish trend with the value of all listed equities rising by N806billion in three weeks, when market capitalization closed on last week Friday at N9.719trillion from N8.913 trillion it opened the month.
Investment analysts said although the bullish trend could be sustained, they are unsure for how long that could be. They however offered clues to how it could be sustained.
With the belief that one type of foreign exchange demand is far more important than others, the CBN had abandoned a hard exchange rate policy in favor of a flexible one, restricted forex access for some categories of imports, cracked down on money transfer operators, slammed series of sanctions, limited withdrawals abroad on naira denominated debit cards, and ended up worsening forex market situation, scaring foreign investors away leaving the market with fewer dollars suppliers and more acute shortage of forex, policies that had been hotly criticized necessitating a review of some of them recently.
The managing director, Cowery Assets Limited, Mr. Johnson Chukwu, said the policy by PFAs and new window by CBN have continued to drive the equities market. According to him, “There is a new investor’s guideline by PENCOM that will make it compulsory for PFAs to invest their portfolio in the equities market.
Chief executive officer, HighCap Securities Limited, Mr. David Adonri, said the three major factors that triggered excessive investment outflows and waning outlook of profitability including high inflation rate, dollar liquidity crisis, and concerns about safety of investments, are beginning to settle.
“If government wants to encourage more inflows and less outflows, its policies must satisfy the three reasons why fund managers invest in any economy and the financial markets,” Adonri said.
The NSE senior dealing member noted that profitability implies that quoted companies must be doing well, and for that reason reward investors by capital appreciation. He hinged companies’ financial performance on enabling and favourable business environment insisting “government must ensure suitable business environment.”