…Predicts scarcity of FX

By Dirisu Yakubu

A leading financial services group, Norrenberger has launched a new product, the Money Market Fund as part of its commitment to deepen financial inclusion in the country.

The Money Market Fund is a collective investment scheme, registered with the Securities and Exchange Commission, SEC, which invests in short-term money market instrument such as treasury bills, bankers’ acceptance, commercial papers and other instruments introduced and approved by the Central Bank of Nigeria, CBN.

Addressing newsmen at the event, Managing Director and Chief Executive Officer of Norrenberger, Mr. Tony Edeh underscored the importance of the fund this way:

“The Fund provides significant value to investors as they enjoy competitive returns on their investment, professional expertise from our fund managers, and an online access to monitor and manage their investment which puts them in total control of their portfolio. These benefits have been designed for clients looking to grow their money with a low-risk investment option.

“Our team of highly qualified and experienced portfolio managers supported with in depth investment research continue to design investment opportunities through the development of strategic products to hedge against inflation and provide better returns despite the tough economic situation in the country.

“We are extremely excited to present our Money Market Fund to the public as I strongly believe the launch of the fund comes at the right time following the excellent performance of our Islamic Fund.” He added.

On her part, Mrs. Abigail Utomi, Norrenberger’s Head of Asset Management stated that “The Norrenberger Money Market Fund will give investors the exposure to a diversified portfolio of money market instruments, while also providing capital preservation, competitive returns, liquidity, safety of funds and quarterly dividend payments.

“The Fund was launched to meet the changing needs of our clients. In line with our vision to simplify wealth creation, our strategic focus is to continue to provide a wide range of financial solutions targeting the need of every single household in Nigeria. This further solidifies Norrenberger’s position as masters in wealth creation in the investment space in Nigeria. The fund is affordable as investors can subscribe with as low as N5,000 and subsequently, multiples of N1,000,” she added.

In 2020, returns on money market fund fell to record level as yield on treasury bills declined below 1% due to CBN policy to boost economic activities in the face of the pandemic. Accordingly, investment in money market fund became unattractive in 2020.

More recently, developments in the policy environment have changed and the market has seen CBN adjust its policy that has pushed yields on money market funds higher. As such, yields on Treasury bills have increased from below 1% to above 9% as of 15th July 2021 auction.

Given the above, investors who have shifted their focus from money market funds to other securities such as equities and bonds are beginning to aggressively buy into the money markets funds in expectations that rate will climb higher due to over 17% headline inflation rate which may compel the CBN to hike its policy rate.

Fielding questions from newsmen at the end of the event, Mr. Edeh painted a picture of the economy in the wake of the impact of the global health pandemic, the coronavirus, saying, increasing interest rates are a reflection of a combination of sundry factors.

“Rising interest rates are a reflection of current economic conditions. Consequently, it is important for investors to understand that a host of factors such as the strength of Nigeria’s economy which affects the supply and demand for funds, fiscal and monetary policies, and the level and expectations for inflation cause interest rates to inch upward or downward.

“In 2020, we saw a remarkable decline in market interest rates (1-year treasury bill rates fell from 5.4 per cent in January 2020 to 0.15 per cent in early December) against the impact of coronavirus lockdowns and a plunge in oil prices. Currently, inflation levels have also been significantly high although, we have experienced three consecutive declines with a drop to 17.75 per cent in June from 17.93 per cent recorded in the previous month.

“When purchasing power is being eroded by inflation and Nigerians are no longer favorably disposed to keeping funds in banks, demand for investment assets that provide a reasonable level of return that can hedge against the current inflation rate increases,” he said.

On investment climate in the next two years, Edeh said there is a window of hope as businesses across sectors are gradually begin to witness a rebound.

“In the medium term, we see the CBN retaining its policy parameters in response to the prevailing economic environment. We also envision an improvement in financial inclusion and an increased number of individuals with basic knowledge for investment in the capital markets.

“High levels of inflation in the Nigerian economy together with an exchange rate that has depreciated beyond N500/$1 has caused investors to lose some trust in naira-based instruments. As a result, investors will be looking to alternative investments that have capacity to hedge against inflation and foreign currency risk.

“Meanwhile, the recent announcement by the CBN to halt sales of foreign exchange to  Bureau De Change operators, BDCs, may cause a temporary scarcity of foreign exchange in the market, and a resultant price hike,” he added.

Also speaking, Norrenberger’s head of business advisory, Dr. Tijjani Oladipupo advised Nigerians desirous of making investment to avoid unlicensed fund managers at all cost.

“My advice to the investing public is that they should patronize licensed fund managers as a means to achieving their investment objectives and to avoid loss of capital due to Ponzi schemes and so many unregulated investment vehicles used to defraud unsuspecting investors.”

Chairman, Board of Norrenberger Group, Aliyu Bala at the event, urged Nigerians to take advantage of the mileage offered by the group to make sound investment decisions.