Pension funds shun equities, PE on restrictive guidelines, skills shortage

Pension fund managers in Africa’s largest economy are dodging equities and private equity investments in the real sector like plagues on the back of constricting rules and dearth of skills.

Pension funds administrators in Nigeria currently allocate up to 16 per cent of their assets in the equity capital market, compared to South Africa where 73 percent of their pension assets are invested in equities alone, while the market capitalisation of the Nigerian Stock Exchange (NSE) currently stands at N26.56 billion.

“The capital market is shallow and cannot attract the growing pension assets. The private markets seem to be the only options available to the pension funds,” said Dave Uduanu, Chairman, Africa Pension Funds Networkat the just concluded CFA Society of Nigeria (the Society) investment conference christened Regional Investing in Africa by Africans.

“The South African Capital Market is the deepest capital market in Africa because it has the biggest pension fund assets. The South African Capital Market has about $300 billion dollars of pension assets, which is about 80% of GDP”, said Uduanu, lamenting why Nigeria is “punching below its weight” in terms of capital market development which is critical to attracting funds for infrastructure development.

Stakeholders converged on Tuesday 15 November 2016 at the Oriental Hotel, Lagos, Nigeria, to sensitize African investors on the imperative to direct their investment focus on the continent, under the umbrella of the Society.

The society comprises a group of investment professionals that work in all areas of finance, and had assembled experts in various facets of the financial sector to explore ideas on how to drive the commitment of Africans to the regions investment landscape in order to reap inherent social and economic benefits.

Speaking at an awards dinner that followed the conference, the immediate past governor of the Central Bank of Nigeria (CBN) and the incumbent emir of Kano, His Highness Muhammad Sanusi II, noted that sustainable and inclusive growth in the continent depends on investment that will require the private sector in Nigeria’s case.

“The role that government can play in this process is defined by: (a) getting the appropriate macro policies in place; (b) creating a supportive business environment”, he said in a lecture: “Nigeria: The Search for a New Growth Model” which he presented at the Society’s award dinner.

With a view to encouraging private sector (especially pension funds) investments in the country’s infrastructure and capital market, the Nigerian Sovereign Investment Authority (NSIA) developed the framework for guaranteeing investments in infrastructure projects, said Uche Orji, managing director AND chief executive officer, NSIA.

Similarly, Isyaku Bala Tilde, head of monitoring at the Securities and Exchange Commission (SEC) disclosed that the commission has introduced rules on infrastructure bond and infrastructure fund to guide development of products tailored to the needs of investors.

The Society also used the occasion to honour new CFA Charterholders, as well as individuals and organisations that have promoted and supported the tenets of the CFA institute (the Institute). Congratulating the new charterholders, the Society noted that the CFA Charter is a global achievement that will set them apart in the finance industry and for the rest of their careers.

“But new challenges await. As charterholders, you represent the highest standards of ethics, education and professional excellence. You are now part of a team of leaders set to guide the finance industry to better serve society”, the Society told the 39 new additions to the Society and the Institute.

Michael G. McMillan, Director, Society Ethics Training at the Institute, noted that trust is the foundation of all investments, and stressed the importance of abiding by the Institute’s code of ethics and standards of professional conducts for delivering sustainable investment services.

“Hopefully, the topics covered at the conference will help the delegates at the conference to improve their services in the finance industry”, he said.

Michael also told Businessday that the conference was auspicious because it is the first investment conference that they (i.e. members of the Society) have ever put up in Nigeria.

“Their goal was to raise the profile of the society and of the CFA designation in the finance community. And it was quite successful,” he opined.

 

INNOCENT UNAH