Fund Manager's Report

Fund Managers' Report As At 30th June, 2021

Domestic Economic Update

Scars that the Covid-19 pandemic created are yet to heal fully. Though administration of vaccines, and consequent phased reopening of economies, has helped rescue economies from the abyss in the prior year, pre-existing macroeconomic fragilities have made the path to recovery uneven. That said, the economy as measured by the Gross Domestic Product (GDP) in the first quarter of the year showed a growth of 0.51%. Specifically, the fragile growth was propelled essentially by growth in information & communication, manufacturing and agricultural sectors. Meanwhile, the Nigeria’s Purchasing Managers Index (PMI) posted 48.8 points in Q2, 2021 (which is significantly below 50 expansion threshold). The index reverted to contraction mode when compared with 51.40 points recorded in Q1, 2021. New orders, exports, output, employment suppliers' delivery times, and stocks of purchases went down marginally in the period under review.

Consumer Price Index (CPI), which measures Inflation closed at 17.93% in Q2, 2021 from 18.17% in Q1, 2021, aggregated the 12-months average to 15.50%, after increasing steadily for 20 months. The slowdown in inflation rate was on the back drop of the decrease in average food prices and a slower increase in the food index to 22.28% (from 22.95% in Q1, 2021).

On to governance updates, The Federal Executive Council (FEC) approved a draft supplementary budget of N895 billion for 2021. Minister of Finance, Zainab Ahmed added that the approval is based on the urgent need to specifically enhance the capacity of the military and para-military agencies to tackle the various security challenges in the country under the Nigerian Comprehensive AIDS programme.

Elsewhere, The Central Bank of Nigeria (CBN), in its bid to moderate and control the prices of maize in the market, has approved the release of 50,000 metric tonnes of maize to 12 major producers, from the strategic maize reserve (SMR) under its Anchor Borrowers’ Programme (ABP).

Financial Market Update

Capital Market Update

The stock market plummeted by 2.91% in Q2, 2021 to close the period at 37,907.28 when compared with Q1, 2020 where it closed at 39,045.13. The Year-to-Date (YTD) returns currently stands at -5.87%. 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 Q1, 2021 with stop rates on 10-year, 15-year and 30-year FGN Bonds closing at 12.74%, 13.50% and 13.70% respectively. All tenors of the FGN bond were oversubscribed.

Foreign Exchange (FX) Market Update

At the official segment of the FX market, the naira depreciated to N410.25/$1 in Q2, 2021 when compared with its closing price of ₦379.00/$1 in Q1, 2021. Also, at the parallel market, the naira depreciated significantly by 3.50% to close at N503.00/$1 in Q2, 2021 when compared with its closed price of N486.00/$1 in Q1, 2021.

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 15.50% while the year-on-year change was 17.93%.

Key Economic Indicators

Find below the key economic indicators for your perusal:

JUN-20 SEP-20 DEC-21 MAR-21 JUN-21
Exchange Rate (₦/USD)               
Official 361.00 379.00 379.00 379.00 410.25
Parallel 386.50 465.00 465.00 486.00 503.00
Monetary Policy Rate (MPR) % 13.50 12.50 11.50 11.50 11.50
Inflation Rate          
12-Mth Ave (%) 11.90 12.44 12.92 14.05 15.50
Year-on-Year (%) 12.56 13.71 14.89 17.33 17.93
Foreign Reserve (Billion USD) 36.19 35.74 35.36 36.20 33.37
Crude oil Price in the Int’l Market ($/barrel) 41.15 40.95 51.80 63.54 75.13
GDP Growth Rate 1.87% -3.62% 0.11% 0.51% 0.51%
NGX-ASI 24,479.22 26,831.76 40,270.72 39,045.13 37,907.28
NGX 30 1,052.09 1,148.54 1,640.11 1,555.92 1,594.87
NSE PENSION INDEX 953.14 1,051.48 1,388.64 1,362.60 1,479.77
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 30th June, 2021 stood as follows:

Quoted Equities 7%, Government Securities 49%, Money Market 32%, Cash & Others 12%. The NLPC PFA – RSA Fund I opened with a unit price of N1.3350 in January 2021 and declined to N1.1588 as at 30th June, 2021 translating to year to date negative growth of 13.20%.

NLPC PFA - RSA Fund II

The Asset Allocation and performance of our NLPC PFA – RSA Fund II as at 30th June, 2021 stood as follows:

Quoted Equities 7%, Government Securities 58%, Money Market 21% and Cash & Others 14%. The unit price declined from N5.4954 in January, 2021 to N5.0931 as at 30th June, 2021 translating to a year to date negative growth of 7.32%.

NLPC PFA - RSA Fund III

The Asset Allocation and performance of our NLPC PFA – RSA Fund III as at 30th June, 2021 stood as follows:

Quoted Equities 3%, Government Securities 71%, Money Market 15% and Cash & Others 11%. The unit price declined from N1.6365 in January, 2021 to N1.5766 as at 30th June, 2021 translating to a year to date negative growth of 3.66%.

NLPC PFA - RSA Fund IV

The Asset Allocation and performance of our NLPC PFA – RSA Fund IV as at 30th June, 2021 stood as follows:

Quoted Equities 1%, Government Securities 82%, Money Market 13% and Cash & Others 4%. The unit price grew from N4.6665 in January, 2021 to N4.6721 as at 30th June, 2021 translating to a year to date growth of 0.12%.

Outlook & Strategy
  • Navigating the recovery phase appropriately to ensure it transcends into a broad-based, inclusive and sustainable growth needs a boost to aggregate demand, output and purchasing power. The recovery in crude oil prices, the rebound in economic activities of non-oil revenue items, continued implementation of the Finance Act and Government efforts towards converging the exchange rate will surely contribute to growth in Q3, 2021. That said, our forecast is constrained by weak fiscal revenue, high dependence on oil, high inflation, high unemployment, security challenges and social tensions, amongst others.
  • Meanwhile, the stock market closed Q2, 2021 on a negative note. This can be attributed to investors’ general apathy for equities and continuous uptick in the short end of the fixed income space. We expect the stock market to close slightly positive in Q3, 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 slow down a bit in Q3, 2021 due to Government expansionary monetary policy coupled with the increased liquidity in the system. The downsides to our fixed income market forecast which may generate hawkish treatment from the CBN are: rising difference in the external account, surge in inflation and fall in crude oil prices, amongst others. In effect, we shall continue to explore strategies to take advantage of the fixed income market with strong bias for securities at the medium/long end of the yield curve in order to improve the portfolio return accordingly.

 

NLPC PFA-RSA FUND I ASSET ALLOCATION AS AT 30TH JUNE, 2021
ASSET CLASS MARKET VALUE(N'MLN) WEIGHT(%)
GOVERNMENT SECURITY 34.41 49
MONEY MARKET 22.77 32
EQUITIES 5.26 7
OTHERS 8.40 12
TOTAL 70.84 100
NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 30TH JUNE, 2021
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 73.60 58
MONEY MARKET 27.27 21
EQUITIES 8.71 7
OTHERS 18.07 14
TOTAL 127.65 100
NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 30TH JUNE, 2021
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 89.05 71
MONEY MARKET 18.93 15
EQUITIES 3.66 3
OTHERS 13.71 11
TOTAL 125.35 100
NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 30TH JUNE, 2021
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 42.66 82
MONEY MARKET 6.62 13
EQUITIES 0.55 1
OTHERS 2.04 4
TOTAL 51.87 100