Fund Manager's Report

Fund Managers' Report As At 31st December, 2022

Domestic Economic Update

The Year 2022 – A period that started with the optimism of consolidation of the post-COVID recovery, albeit slowly, but eventually went southwards with the multifaceted impact of the Russia-Ukraine conflict shattered the hopes of moderation as the conflict introduced new risks to the inflationary pressures, worsening the supply chain constraints and tighter monetary conditions.

However, the Nigeria economy as measured by the Gross Domestic Product (GDP) grew by 2.25% in Q3, 2022, the sluggish growth is attributable to the base effects of recession and the challenging economic conditions that have impeded productive activities.

Meanwhile, the Nigeria’s Purchasing Managers Index (PMI) posted 54.60 points in Q4 2022 (which is significantly above 50 points expansion threshold). The index grew at a faster rate when compared with 53.70 points recorded in Q3, 2022, with new orders, suppliers' delivery times, output, employment, and growth in stocks purchased expanding during the period under review.

Consumer Price Index (CPI), which measures Inflation rose to 21.34% in Q4, 2022 compared to 20.77% recorded in Q3, 2022 while the 12-months average increased slightly to 18.85% in Q4, 2022 from 17.43% in Q3, 2022.

As it relates to governance update, The President, Muhammadu Buhari signed the 2023 budget of N21.83 trillion into law. Elsewhere, Minister of State for Agriculture and Rural Development, Hon. Mustapha Shehuri, launched the National Rice Development Strategy (NRDS) II, to provide a direction for the development of the rice sub-sector.

Financial Market Update

Capital Market Update

The stock market gained by 4.54% in Q4, 2022 to close the period at 51,251.06 basis points when compared with Q3, 2022 where it closed at 49,024.16 basis points. The Year-to-Date (YTD) returns currently stands at 19.98%. The positive performance in the period under review can be attributed to investor’s general bargain hunting for equities.

In line with our medium/long term view of the equity market, we maintained our hold strategy on the stocks in the portfolio but enhanced it a bit by taking profit in some stocks that are overvalued. Meanwhile, as a professional fund manager that is conscious of the performance of the portfolio, we explored pockets of available fixed income securities with impressive yields in the market to stabilize and improve return on investment.

At the primary market in Q4, 2022, the stop rates on 7-year, 10-year, and 15-year FGN Bonds were 14.6000%, 14.7500% and 15.8000% respectively when compared with Q3, 2022 with stop rates on 3-year, 10-year, and 15-year FGN Bonds which were 13.5000%, 13.8490% and 14.5000% respectively. All tenors of the FGN Bonds except the 7-year FGN bond were oversubscribed.

Foreign Exchange (FX) Market Update

At the official segment of the FX market, the naira depreciated by 5.59% to N461.50/$1 in Q4, 2022 when compared with the closing price of N437.07/$1 in Q3, 2022. However, at the parallel market, the naira appreciated by 0.41% to close at N737.00/$1 in Q4, 2022 when compared with the closing price of N740.00/$1 in Q3, 2022.

Monetary Policy And Inflation Update

The monetary policy committee (MPC) met in the period under review and a decision was reached to hike Monetary Policy Rate by 100 basis points to 16.50% from 15.50%.

The latest official inflation rate as released by the Bureau of Statistics shows a 12-months average of 18.85% while the year-on-year change was 21.34%.

Key Economic Indicators

Find below the key economic indicators for your perusal:

DEC-21 MAR-22 JUN-22 SEP-22 DEC-22
Exchange Rate (₦/USD)               
Official 435.00  416.17 425.05 437.03 461.50
Parallel 564.90 587.00 607.06 740.00 737.00
Monetary Policy Rate (MPR) % 11.50 11.50 13.00 15.50 16.50
Inflation Rate          
12-Mth Ave (%) 16.95 16.73 16.45 17.43 18.85
Year-on-Year (%) 15.63 15.92 17.71 20.77 21.34
Foreign Reserve (Billion USD) 40.53 39.55 39.16 38.28 37.09
Crude oil Price in the Int’l Market ($/barrel) 77.78 113.45 109.03 85.14 84.03
GDP Growth Rate 3.98% 3.11% 3.54% 2.25% 2.25
NGX-ASI 42,716.44 46,965.48 51,817.59 49,024.16 51,251.06
NGX 30 1,722.30 1,791.07 1,887.62 1,746.95 1,842.50
NSE PENSION INDEX 1,624.09 1,704.43 1,823.58 1,659.38 1,792.58
Liquidity Ratio (%) 30.00 30.00 30.00 30.00 30.00
Cash Reserve Ratio (%) 27.50 27.50 27.50 32.50 32.50

 

NLPC PFA - RSA Fund I

The Asset Allocation and performance of our NLPC PFA – RSA Fund I as at 31st December, 2022  stood as follows:  

Quoted Equities 9%, Government Securities 58%, Money Market 29%, Cash & Others 4%. The unit price grew from N1.2132 in January, 2022 to N1.3146 as at 31st December, 2022 translating to a year-to-date and annualized return of 8.36%.

NLPC PFA - RSA Fund II

The Asset Allocation and performance of our NLPC PFA – RSA Fund II as at 31st December, 2022  stood as follows:

Quoted Equities 6%, Government Securities 66%, Money Market 9% and Cash & Others 19%. The unit price grew from N5.3186 in January, 2022 to N5.7203 as at 31st December, 2022 translating to a year-to-date and annualized return of 7.55%.

NLPC PFA - RSA Fund III

The Asset Allocation and performance of our NLPC PFA – RSA Fund III as at 31st December, 2022   stood as follows:

Quoted Equities 3%, Government Securities 78%, Money Market 6% and Cash & Others 13%. The unit price grew from N1.6459 in January, 2022 to N1.7849 as at 31st December, 2022, translating to a year-to-date and annualized return of 8.45%.

NLPC PFA - RSA Fund IV

The Asset Allocation and performance of our NLPC PFA – RSA Fund IV as at 31st December, 2022  stood as follows:

Quoted Equities 1%, Government Securities 79%, Money Market 14% and Cash & Others 6%. The unit price grew from N4.8681 in January, 2022 to N5.2582 as at 31st December, 2022 translating to a year-to-date and annualized return of 8.01%.

NLPC PFA - RSA FUND V

The Asset Allocation and performance of our NLPC PFA – RSA Fund V as at 31st December, 2022  stood as follows:

Money Market 65%, Government Securities 10% and Cash & Others 25%. The unit price grew from N1.1226 in January, 2022 to N1.2557 as at 31st December, 2022 translating to a year-to-date and annualized return of 11.86%.

NLPC PFA - RSA FUND VI - ACTIVE

The Asset Allocation and performance of our NLPC PFA – RSA Fund VI - Active as at 31st December, 2022  stood as follows:

Quoted Equities 20%, Government Securities 57%, Money Market 13% and Cash & Others 10%. The unit price grew from N1.0042 in January, 2022 to N1.1923 as at 31st December, 2022 translating to a year-to-date and annualized return of 18.73%.

NLPC PFA - RSA FUND VI - RETIREE

The Asset Allocation and performance of our NLPC PFA – RSA Fund VI - Retiree as at 31st December, 2022  stood as follows:

Quoted Equities 6%, Government Securities 91%, and Cash & Others 3%. The unit price grew from N1.0000 in January, 2022 to N1.0756 as at 31st December, 2022 translating to year-to-date and annualized return of 7.56%.

Outlook & Strategy
  • We expect the Nigeria economic growth to ease further in 2023 because of inflation and interest rates/borrowing costs that will remain elevated, discouraging business investment and consumption. Other downsides are social rifts & violence ahead of February 2023 elections, unplanned outages at onshore production facilities, a deteriorating security situation, and the lagged effect of years of underinvestment coupled with the sanctions against Russia which is expected to have a considerable adverse effect against the global economy, amongst others.

  • However, Government’s investment push & stimulus packages and new oil bill should support economic activities and may spring a surprise going forward. We expect the stock market to close below expectations in the year 2023 because of general elections fear. Consequently, we shall continue to maintain our medium to long term view of the equities market. Whilst holding on to stocks with good fundamentals, we shall continue to increase our holdings as buy opportunities exist.

  • Lastly, we expect an elevated yield environment in 2023 due to rising global interest rates and consequent capital outflows, investors jitters caused by the elections, rising inflation, huge budget deficit, low accretion to foreign reserve due to low crude oil production, CBN’s action to prioritise price stability, amongst others. The downsides to our fixed income market forecast which may force CBN to adjust the rates downward are but not limited to surge in crude oil production, continuous increase in crude oil prices, an improved external account, increase in foreign remittances, declining inflation, significant growth in GDP, amongst others. In effect, we shall continue to explore strategies to take advantage of the fixed income market with bias for securities at the medium/long end of the yield curve to improve the portfolio return accordingly.

NLPC PFA-RSA FUND I ASSET ALLOCATION AS AT 31ST DECEMBER, 2022
ASSET CLASS MARKET VALUE(N'MLN) WEIGHT(%)
GOVERNMENT SECURITY 60.69 58
MONEY MARKET 30.95 29
EQUITIES 9.32 9
OTHERS 3.88 4
TOTAL 104.84 100
NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 31ST DECEMBER, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 88.62 66
MONEY MARKET 11.98 9
EQUITIES 7.60 6
OTHERS 25.33 19
TOTAL 133.53 100
NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 31ST DECEMBER, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 108.82 78
MONEY MARKET 8.89 6
EQUITIES 3.97 3
OTHERS 18.52 13
TOTAL 140.20 100
NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 31ST DECEMBER, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 46.04 79
MONEY MARKET 7.87 14
EQUITIES 0.47 1
OTHERS 3.68 6
TOTAL 58.05 100
NLPC PFA-RSA FUND V ASSET ALLOCATION AS AT 31ST DECEMBER, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITIES 0.30 10
MONEY MARKET 1.97 65
OTHERS 0.78 25
TOTAL 3.05 100
NLPC PFA-RSA FUND VI - ACTIVE ASSET ALLOCATION AS AT 31ST DECEMBER, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 177.07 57
MONEY MARKET 40.56 13
EQUITIES 60.67 20
OTHERS 32.41 10
TOTAL 310.71 100
NLPC PFA-RSA FUND VI - RETIREE ASSET ALLOCATION AS AT 31ST DECEMBER, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITIES 5.77 91
EQUITIES 0.36 6
OTHERS 0.19 3
TOTAL 6.33 100