Fund Manager's Report

Fund Managers' Report As At 31st March, 2021

Domestic Economic Update

The economy returned to growth, albeit marginally, in the final quarter of last year, with GDP expanding by 0.11% year-on-year. The print swung from the third quarter’s 3.62% contraction and beat market expectations. The uptick in the headline came on the back of an improvement in the following sectors: non-oil, agriculture and services.

Meanwhile, the Nigeria’s Purchasing Managers Index (PMI) posted 51.4 points in Q1, 2021 (which is marginally above 50 expansion threshold). The index grew at a slower rate when compared with 55.00 points recorded in Q4, 2020. New orders, exports and output increased faster while employment went up marginally.  

Consumer Price Index (CPI), which measures Inflation sustained its upward trajectory, as it worsened by 1.58% to 17.33% in Q1, 2021 from 15.75% in Q4, 2020, increasing the 12-months average to 14.05%, which stands as the 18th consecutive monthly increase and highest inflation level since December, 2017. The supply chain challenges include currency pressures, hike in electricity tariff and insecurity in the food producing part of the country and a weaker harvest season continued to be the major drivers of upward trend in CPI.

The widely expected Q4, 2020 unemployment data was released during the period and spiked by 6.2% to 33.30% from 27.10% in Q2, 2020, which happened to be the previous rate released by the National Bureau of Statistics (NBS) as it showed the growing imbalances in the Nigerian Labor market. This makes Nigeria the country with the 3rd highest rate of unemployment in the World, based on the misery index (Inflation + underemployment + unemployment).

On to governance updates, the Federal Government has approved the sum of $1.5 billion for the rehabilitation of Port Harcourt Refinery, which is the largest refining company in the country. The Minister of State for Petroleum Resources, Mr. Timipre Sylva, said that the rehabilitation which would be in three phases will commence immediately and would be handled by an Italian firm, Tecnimont SPA. Elsewhere, The Central Bank of Nigeria (CBN) has introduced a rebate of N5 for every $1 remitted to Nigeria through licensed International Money Transfer Organisations (IMTOs). This rebate will be paid into the bank accounts of beneficiaries, following receipt of remittance inflows. CBN governor, Godwin Emefiele, disclosed that the new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.

Financial Market Update

Capital Market Update

The stock market nosedived by 3.04% in Q1, 2021 to close the period at 39,045.13 when compared with Q4, 2020 where it closed at 40,270.72. The negative performance in the period under review were largely as a result of sustained sell – offs and profit taking activities of short term players. 

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 selling those stocks with weak fundamentals. 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.

The yields on Federal Government Bonds closed relatively higher at the primary market in the period under review when compared with Q4, 2020 with stop rates on 10-year, 15-year and 25-year FGN Bonds closing at 10.50%, 11.50% and 12.00% respectively. All tenors of the FGN bond were oversubscribed.

Foreign Exchange (FX) Market Update

At the official segment of the FX market, the naira closed flat in Q1, 2021 when compared with its closed price of ₦379.00/$1 in Q4, 2020. However, at the parallel market, the naira depreciated marginally by 4.52% to closed at N486.00/$1 in Q1, 2021 when compared with its closed price of N465.00/$1 in Q4, 2020.

Monetary Policy And Inflation Update

The monetary policy committee (MPC) met during the period under review and left the rates unchanged.

The latest official inflation rate as released by the Bureau of Statistics shows a 12-months average of 14.05% while the year-on-year change was 17.33%.

Key Economic Indicators

Find below the key economic indicators for your perusal:

MAR-20 JUN-20 SEP-20 DEC-20 MAR-21
Exchange Rate (₦/USD)          
Official 361.00 361.00 379.00 379.00 379.00
Parallel 385.22 386.50 465.00 465.00 486.00
Monetary Policy Rate (MPR) % 13.50 13.50 12.50 11.50 11.50
Inflation Rate          
12-Mth Ave (%) 11.35 11.90 12.44 12.92 14.05
Year-on-Year (%) 12.20 12.56 13.71 14.89 17.33
Foreign Reserve (Billion USD) 35.52 36.19 35.74 35.36 36.20
Crude oil Price in the Int’l Market ($/barrel) 22.74 41.15 40.95 51.80 63.54
GDP Growth Rate 1.87% 1.87% -3.62% -3.62% 0.11%
NSE-ASI 21,300.47 24,479.22 26,831.76 40,270.72 39,045.13
NSE 30 902.37 1,052.09 1,148.54 1,640.11 1,555.92
NSE PENSION INDEX 826.75 953.14 1,051.48 1,388.64 1,362.60
Liquidity Ratio (%) 30.00 30.00 30.00 30.00 30.00
Cash Reserve Ratio (%) 22.50 27.50 27.50 27.50 27.50
NLPC PFA - RSA Fund I

The Asset Allocation and performance of our NLPC PFA – RSA Fund I as at 31st March, 2021 stood as follows:

Quoted Equities 24%, Government Securities 59%, Money Market 15%, Cash & Others 2%. The NLPC PFA – RSA Fund I opened with a unit price of N1.3350 in January 2021 and declined to N1.1825 as at 31st March, 2021 translating to year to date negative growth of 11.42%.

NLPC PFA - RSA Fund II

The Asset Allocation and performance of our NLPC PFA – RSA Fund II as at 31st March, 2021 stood as follows:

Quoted Equities 6%, Government Securities 61%, Money Market 20% and Cash & Others 13%. The unit price declined from N5.4954 in January, 2021 to N5.0858 as at 31st March, 2021 translating to a year to date negative growth of 7.45%.

NLPC PFA - RSA Fund III

The Asset Allocation and performance of our NLPC PFA – RSA Fund III as at 31st March, 2021 stood as follows:

Quoted Equities 3%, Government Securities 71%, Money Market 17% and Cash & Others 9%. The unit price declined from N1.6365 in January, 2021 to N1.5624 as at 31st March, 2021 translating to a year to date negative growth of 4.53%.

NLPC PFA - RSA Fund IV

The Asset Allocation and performance of our NLPC PFA – RSA Fund IV as at 31st March, 2021 stood as follows:

Quoted Equities 2%, Government Securities 83%, Money Market 11% and Cash & Others 4%. The unit price declined from N4.6665 in January, 2021 to N4.6130 as at 31st March, 2021 translating to a year to date negative growth of 1.15%.

Outlook & Strategy
  • Available data and forecasts for key macroeconomic variables for the Nigerian economy suggest further rebound in output growth for Q2, 2021. This is predicated on the sustained, as well as additional interventions by the monetary and fiscal authorities to keep up the recovery momentum in the economy, favourable upsurge in crude oil prices, foreign exchange market stability and successful deployment of the new COVID-19 vaccines that could further stimulate economic activities and ultimately boost output growth. Given the potential rebound in output growth, bolstered by the resumption of economic activities post COVID-19, inflationary pressure in the economy is projected to moderate in the short-to-medium term. The underlying risks of the efficacy of the COVID-19 vaccines against known and newly emerging strains of the virus, the uncertainty that the existing vaccines could lead to herd immunity and unequal access to COVID-19 vaccine are some of the headwinds. High unemployment, security challenges and social tensions further cloud the outlook.
  • Meanwhile, the stock market closed Q1, 2021 on a negative note. This can be attributed to investors’ general apathy for equities and unimpressive result of some listed companies coupled with portfolio switching from equities to fixed income instruments.  Likewise, we expect the stock market to close slightly negative in Q2, 2021. In this context, 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 yields in fixed income market to increase in Q2, 2021 due to surge in inflation, FX issues, high budget deficit, low foreign reserve, CBN recent action to prioritise price stability over economic recovery, ongoing security challenges in the country, high unemployment rate, amongst others. The downsides to our fixed income market forecast which may bring about dovish treatment from the CBN are: continuous increase in crude oil prices, an improved external account, 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 strong focus on securities at the medium/long end of the yield curve in order to improve the portfolio return accordingly.
  • We will continue to focus on our goal of growing the Fund under management by optimizing returns on investment without compromising the security and liquidity of assets and also ensuring that every worker with retirement savings account with the company receives his/her benefits as at when due.

 

NLPC PFA-RSA FUND I ASSET ALLOCATION AS AT 31ST MARCH, 2021
ASSET CLASS MARKET VALUE(N'MLN) WEIGHT(%)
GOVERNMENT SECURITY 30.14 59
MONEY MARKET 7.53 15
EQUITIES 12.10 24
OTHERS 1.01 2
TOTAL 50.77 100
NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 31ST MARCH, 2021
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 77.59 61
MONEY MARKET 25.10 20
EQUITIES 8.45 6
OTHERS 16.48 13
TOTAL 127.62 100
NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 31ST MARCH, 2021
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 87.66 71
MONEY MARKET 20.75 17
EQUITIES 3.67 3
OTHERS 11.05 9
TOTAL 123.13 100
NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 31ST MARCH, 2021
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 42.50 83
MONEY MARKET 5.87 11
EQUITIES 0.79 2
OTHERS 2.16 4
TOTAL 51.32 100