Pension Fund Administrators (PFA) say they are willing to invest in infrastructure but with a provision that such deals must be properly structured.
Oguche Agudah, chief executive officer, Pension Fund Operators Association of Nigeria (PenOp) said at a webinar organised by the association in conjunction with investment houses, Rand Merchant Bank, Standard Bank Group and Africa Finance Corporation (AFC).
The seminar with the theme ‘The Nigerian Economic and Investment Outlook: A Focus on Pension Fund Investment Strategies’ was moderated by Wole Famurewa.
Oguche said pension fund managers were enthusiastic about investing in infrastructure, disclosing that in a pool among them, 42 percent indicated they were actively looking for investments in infrastructure, while 50 percent said they would consider these investments.
He said although fund managers were cautious about private equity (PE), they will consider it on a deal-by-deal basis, adding that 25 percent of them were actively looking to invest there, while 67 percent say they would consider it.
“Fund managers are looking to invest in Impact Focused Funds but transparency and structure are key, as poll shows 75 percent are either actively looking or will consider investing in an impact focused fund.”
“For fund managers, transparency is key to investing in a Fund of Fund.”
He said managers have noted the extent to which a fund-of-fund approach can diversify their portfolios and help bridge the technical capacity gap when it comes to due diligence, but for them, the key is transparency. Of polled fund managers, 67 percent indicated they would consider private equity investments, Oguche said.
Oguche also said fund managers were willing to engage the market more directly, stating that of the fund managers polled, 75 percent indicated interest in engaging in curated beauty parades with issuers and financial advisors.
Rita Babihuga-Nsanze, chief economist, Africa, Africa Finance Corporation, a panellist speaking on 2023 Outlook for Nigeria, said the upcoming elections occur against a backdrop of pressing challenges which will leave the next administration with some tough policy decisions from day one.
She listed some of the issues to include Mounting Fiscal Pressure, Weakening Debt Affordability, Oil Production Challenges, and Crippling Subsidy Overhang among others.
Babihuga-Nsanze said the growth was expected to remain at 2022 levels with significant downside risks stemming from long standing structural challenges.
“We expect growth to soften in 2022 and 2023 on the back of constrained FX supply and weakened capacity of the federal government to stimulate growth as it struggles to finance itself.”
She said whether the upcoming elections would deliver the much-needed reforms for the oil sector, the fiscal sector and exchange rate regimes, will determine if long-standing structural economic imbalances persist in the near term.”
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The economist, however, cautioned that without the necessary structural reforms, the current forex liquidity pressure would persist in 2023 and potentially in 2024 on the back of increasing downward pressure on foreign reserves.
Her priorities for the new government are securing the oil sector and output, removal of the subsidy regime, and the country’s FX regime.
Eyitope Owolabi, head of structured sales, West Africa, Rand Merchant Bank, also a panellist, looking at the sector, outlined the lack of diversification in pension assets, stressing use of derivatives in diversification but also hedging pension fund position on investments.
Muyiwa Oni, regional head of research, Standard Bank Group, another panellist, looking at the equities market, said the NGX over the last 10 years has performed relatively well in domestic value terms, returning 200 percent over the last 10 years.
According to him, performance over the last year has been carried by brewers and the oil and gas sector, noting that NGX is also having a good 2023, growing 4.4 percent this year and earnings will be driven by banks taking advantage of the high-interest environment.
“We propose an overweight recommendation for cements and banks. We expect elevated prices to drive earnings for cement names. We expect the higher interest rate environment to drive higher net interest margins and earnings for banks as yields on government securities and customer loans increase, the equities market, the expert said.
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