Fund Manager's Report

Fund Managers' Report As At 30th June, 2022

Domestic Economic Update

The global economy started the year with the optimism of growth consolidation given the continued normalisation of economic activities, and as supply chain constraints were expected to ease further into the year. However, the Russia Ukraine conflict and the associated sanctions by NATO and its allies have negatively impacted global trade and stoked inflationary pressures. Having said that, the Nigerian economy as measured by the Gross Domestic Product (GDP) grew by 3.11% in Q1, 2022, showing trajectory recovery on a path of growth in economic activities.

Meanwhile, the Nigeria’s Purchasing Managers Index (PMI) posted 50.90 points in Q2, 2022 (which is marginally above 50 points expansion threshold). The index grew at a lower rate when compared with 54.10 points recorded in Q1, 2022. New orders, suppliers' delivery times, output, employment, and stocks of purchases growth expanded moderately during the period under review.

Consumer Price Index (CPI), which measures Inflation rose to 17.71% in Q2, 2022 compared to 15.92% recorded in Q1, 2022. However, the 12-months average decreased slightly to 16.45% in Q2, 2022 from 16.54% in Q1, 2022.

As it relates to governance update, The Federal Government through the Federal Executive Council (FEC) approved reforms to boost Nigeria’s non-oil revenue to N3.8 trillion and oil revenue to N160 billion annually. This is to address some of the fiscal challenges of the federal government as it is intended to raise Nigeria’s non-oil revenue potential. Elsewhere, The Minister of Power, Abubakar Aliyu announced the approval of multiple power projects worth billions of naira aimed at strengthening the capacity of the Transmission Company of Nigeria (TCN) and shore up power supply across Nigeria.

Financial Market Update

Capital Market Update

The stock market improved by 10.33% in Q2, 2022 to close the period at 51,817.59 basis points when compared with Q1, 2022 where it closed at 46,965.48 basis points. The Year-to-Date (YTD) returns currently stands at 21.31%. The positive performance in the period under review can be attributed to investors’ demand for some highly capitalized stocks.

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 Q2, 2022, the stop rates on 3-year, 10-year, and 20-year FGN Bonds were 10.10%, 12.50% and 13.15% respectively when compared with Q1, 2022 with stop rates on 10-year and 20-year FGN Bonds closing at 10.15%, 12.70% respectively. All tenors of the FGN Bonds were oversubscribed.

Foreign Exchange (FX) Market Update

At the official segment of the FX market, the naira depreciated by 2.13% to N425.05/$1 in Q2, 2022 when compared with its closed price of ₦416.17/$1 in Q1, 2022. Also, at the parallel market, the naira depreciated by 3.42% to close at N607.06/$1 in Q2, 2022 when compared with its closed price of N587.00/$1 in Q1, 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 from 11.50% to 13.00%.

The latest official inflation rate as released by the Bureau of Statistics shows a 12-months average of 16.45% while the year-on-year change was 17.71%.

Key Economic Indicators

Find below the key economic indicators for your perusal:

JUN-21 SEP-21 DEC-21 MAR-22 JUN-22
Exchange Rate (₦/USD)               
Official 380.69 380.69 435.00 416.17 425.05
Parallel 503.00 577.00 564.90 587.00 607.06
Monetary Policy Rate (MPR) % 11.50 11.50 11.50 11.50 13.00
Inflation Rate          
12-Mth Ave (%) 15.93 16.83 16.95 16.73 16.45
Year-on-Year (%) 17.75 16.63 15.63 15.92 17.71
Foreign Reserve (Billion USD) 33.37 36.41 40.53 39.55 39.16
Crude oil Price in the Int’l Market ($/barrel) 75.13 78.35 77.78 113.45 109.03
GDP Growth Rate 5.01% 5.01% 3.98% 3.11% 3.11%
NGX-ASI 37,907.28 40,221.17 42,716.44 46,965.48 51,817.59
NGX 30 1,594.87 1,674.51 1,722.30 1,791.07 1,887.62
NSE PENSION INDEX 1,479.77 1,552.33 1,624.09 1,704.43 1,823.58
Liquidity Ratio (%) 30.00 30.00 30.00 30.00 30.00
Cash Reserve Ratio (%) 27.50 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 30th June, 2022 stood as follows:  

Quoted Equities 10%, Government Securities 60%, Money Market 30%, Cash & Others 0%. The unit price grew from N1.2132 in January, 2022 to N1.2629 as at 30th June, 2022 translating to a year-to-date positive growth of 4.10% and an annualized return of 8.26%.

NLPC PFA - RSA Fund II

The Asset Allocation and performance of our NLPC PFA – RSA Fund II as at 30th June, 2022 stood as follows:

Quoted Equities 6%, Government Securities 70%, Money Market 8% and Cash & Others 16%. The unit price grew from N5.3186 in January, 2022 to N5.5620 as at 30th June, 2022 translating to a year-to-date positive growth of 4.58% and an annualized return of 9.23%.

NLPC PFA - RSA Fund III

The Asset Allocation and performance of our NLPC PFA – RSA Fund III as at 30th June, 2022  stood as follows:

Quoted Equities 3%, Government Securities 79%, Money Market 7% and Cash & Others 11%. The unit price grew from N1.6459 in January, 2022 to N1.7213 as at 30th June, 2022, translating to a year-to-date positive growth of 4.58% and an annualized return of 9.24%.

NLPC PFA - RSA Fund IV

The Asset Allocation and performance of our NLPC PFA – RSA Fund IV as at 30th June, 2022 stood as follows:

Quoted Equities 1%, Government Securities 79%, Money Market 15% and Cash & Others 5%. The unit price grew from N4.8681 in      January, 2022 to N5.0705 as at 30th June, 2022 translating to a year-to-date positive growth of 4.16% and an annualized return of 8.38%.

NLPC PFA - RSA FUND V

The Asset Allocation and performance of our NLPC PFA – RSA Fund V as at 30th June, 2022 stood as follows:

Money Market 97% and Cash & Others 3%. The unit price grew from N1.1226 in January, 2022 to N1.1750 as at 30th June, 2022 translating to a year-to-date positive growth of 4.67% and an annualized return of 9.41%.

NLPC PFA - RSA FUND VI - ACTIVE

The Asset Allocation and performance of our NLPC PFA – RSA Fund VI - Active as at 30th June, 2022 stood as follows:

Quoted Equities 22%, Government Securities 64%, Money Market 3% and Cash & Others 11%. The unit price grew from N1.0042 in January, 2022 to N1.1481 as at 30th June, 2022 translating to a year-to-date positive growth of 14.33% and an annualized growth of 28.90%.

NLPC PFA - RSA FUND VI - RETIREE

The Asset Allocation and performance of our NLPC PFA – RSA Fund VI - Retiree as at 30th June, 2022 stood as follows:

Quoted Equities 5%, Government Securities 80%, Money Market 3%, and Cash & Others 12%. The unit price grew from N1.0000 in January, 2022 to N1.0281 as at 30th June, 2022 translating to year-to-date growth of 2.81% and an annualized growth of 6.84%.

Outlook & Strategy
  • The economy will grow at a softer pace in Q3, 2022 while Inflation will remain elevated, eating into consumers’ pockets and Power supply issues will further jeopardize activity. Moreover, social rifts and violence ahead of the February 2023 elections could undermine momentum. Also, the sanctions against Russia are expected to have a considerable adverse effect against the global economy, in which Nigeria is not an exemption. However, government’s investment push & stimulus package and the new oil bill should support activity going forward.

  • Meanwhile, the stock market closed Q2, 2022 on a positive note. This can be attributed to impressive results released by some companies for Q1, 2022 and the fact that investors took position in undervalued stocks coupled with the surge in oil price. However, we expect the stock market to decline in Q3, 2022. In effect, we shall continue to maintain our medium to long term view of the equities market by holding on to stocks with good fundamentals and continue to increase our holdings as buy opportunities exist.

  • Lastly, we expect yields in fixed income market to slightly increase in Q3, 2022 due to recent Monetary Policy Rate (MPR) hike, huge budget deficit brought about by expanded oil subsidy, low lodgement to foreign reserve due to low crude oil production, CBN’s bias for price stability when naira is pressured, effect of developed economies going hawkish and high inflation, amongst others. The downsides to our fixed income market forecast which may bring about dovish treatment from the CBN are 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 focus on 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 30TH JUNE, 2022
ASSET CLASS MARKET VALUE(N'MLN) WEIGHT(%)
GOVERNMENT SECURITY 55.95 60
MONEY MARKET 28.13 30
EQUITIES 8.97 10
OTHERS 0.38 0
TOTAL 93.43 100
NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 30TH JUNE, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 94.58 70
MONEY MARKET 11.25 8
EQUITIES 8.27 6
OTHERS 21.92 16
TOTAL 136.02 100
NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 30TH JUNE, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 109.30 79
MONEY MARKET 9.52 7
EQUITIES 3.99 3
OTHERS 15.08 11
TOTAL 136.89 100
NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 30TH JUNE, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 44.76 79
MONEY MARKET 8.27 15
EQUITIES 0.49 1
OTHERS 3.09 5
TOTAL 56.58 100
NLPC PFA-RSA FUND V ASSET ALLOCATION AS AT 30TH JUNE, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
MONEY MARKET 2.27 97
OTHERS 0.06 3
TOTAL 2.33 100
NLPC PFA-RSA FUND VI - ACTIVE ASSET ALLOCATION AS AT 30TH JUNE, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 166.24 64
MONEY MARKET 7.35 3
EQUITIES 56.13 22
OTHERS 28.15 11
TOTAL 257.87 100
NLPC PFA-RSA FUND VI - RETIREE ASSET ALLOCATION AS AT 30TH JUNE, 2022
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITIES 5.58 80
MONEY MARKET 0.20 3
EQUITIES 0.36 5
OTHERS 0.81 12
TOTAL 7.20 100