PENCON assets to hit N4.5trn in five years

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...as commission mulls offshore investments in 2012  Assets of National Pension Commission (PENCOM) are expected to hit N4.5 trillion in the next five years, 300 percent increment over the current N1.5 trillion level, according to analysts at Renaissance Capital (Rencap). 

Quoting Reuters, Rencap in the current report said that Muhammad Ahmad, the commission's director-general reiterated that the development is expected to boost systemic liquidity. 

The commission, according to the report, is considering the possibility of fund managers to invest 5-10 percent offshore by 2012.   

"We think this would be positive in terms of investment diversification; besides, such a step could result in local pension funds taking advantage of more attractive rates of return overseas," Ahmad said. Besides, the analysts said that additionally, the number of retirement savings accounts would double to 8 million as state governments and the informal sector incrementally sign up to the new scheme. 

BusinessDay investigations revealed that over four million contributors have contributed to the pool as at the end of last quarter of last year. 

According to the analysts, domestic fund managers can hold 25 percent of their assets in equities and 35 percent in the money markets, but there is no limit on government bonds, but observed "that the yield curve remains depressed amid uncertainties associated with the state of the financial system." 

Specifically, they said that the yield on the 91-day treasury bill is now back to 2.0 percent and those on the 20-year bond close to 7.4-7.8 percent, adding that "in this context, real rates on sovereign bonds are increasingly negative, if taking into account that inflation reached 12.3 percent in January and may be somewhat tilted to the upside. There are also indications that deposit rates may retreat as banks reduce lending." 

They further observed that the development could fuel a modest structural shift in pension funds to equities and potentially serving as a catalyst for a further stock market rally. 

However, the report said that the flat 12.3 percent year-on-year (YoY) in February-January, up from 12.0 percent in December was driven by food inflation which nevertheless retreated marginally to 13.9 percent from 14.0 percent in January, above the 13.6 percent recorded in December. 

Non-food inflation also remained unchanged at 10.1 percent, from 9.7 percent in the same timeframe, reducing the likelihood of an inflation spike associated with excess liquidity in the system.   

"In this regard, sub-inflation in the housing, water, electricity, gas and other fuel category dropped slightly, but annual furnishing and household equipment maintenance prices advanced for a fourth consecutive month. 

Overall, this implies that 12-month average inflation ebbed to 12.1 percent, from 12.2 percent and 12.4 percent, respectively," the report noted.   Nigeria targets 11.2 percent inflation rate in this year's budget.

PENCON assets to hit N4.5trn in five years

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