The Nigerian Pension Industry – A journey with definite destination (2)

•As investments in corporate debts rise 13.9% to N904.9bn

By Peter Egwuatu

Pension Fund Adminis trators, PFAs, are moving most of their pension asset holdings to corporate bonds even as the total investments in corporate debt securities, CDS, in May 2021 rose 13.9 per cent to N904.9 billion as against  N794.7 billion in the preceding month.

Pension assets investments in CDS comprise of corporate bonds, corporate infrastructure bonds and green bonds.

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A report from the National Pension Commission, PenCom, has indicated that PFAs’ pension assets allocation to corporate bonds is about 96.6 percent of the total CDS as at end May.

Also growth in the allocations to corporate bonds rose significantly by 14.2 percent as against 6.2 percent and 2.9 percent for corporate infrastructure bonds and green bonds.    

Meanwhile, investment analysts have stated that due to the relatively low income yield from fixed income securities investors are shifting interest to corporate bonds.

Norrenberger, a financial services group, stated in its 2021 economic outlook report: “ Yields on fixed income instruments would remain low and thus was expected to result in many corporate borrowers to see bonds as a suitable source of capital to cover their increasing cost of operations.”

Consequently, various companies have taken advantage of the low performance in the fixed income market to raise corporate bonds.

Three issuers namely, Dangote Cement Plc (N300 billion) MTN Nigeria Plc (N100 billion) and BUA Cement Plc N115 billion) have raised over 60 per cent of the total bond raised in the market.

Other issuers include:; Fidelity Bank Plc who raised N41.213 billion; Flour Mills of Nigeria Plc raised N29.8 billion; Nova Merchant Bank raised N10 billion; Emzor Pharmaceuticals raised N13.7 billion; while Mecure Industries accessed the market for N3 billion just as CardinalStone Financing SPV Plc raised N5 billion; C& I Leasing Plc (N10 billion); CERPAC (N15 billion); Coronation Merchant Bank (N30 billion).

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