Analysis of Pension Operating Environment, Extract from PenCom Q2, 2020 Report
The National Pension Commission has released its 2nd quarter report for the Pension Industry. PenCom in its report gave an analysis of the pension operating environment for Q2, 2020.
Below is the analysis
Macroeconomic Development
In the second quarter of 2020, Nigeria’s aggregate Gross Domestic Product (GDP) stood at N34,023,197.60 million in nominal terms, This was 2.8% lower when compared with the second quarter of 2019 which recorded an aggregate GDP of N35,001,877.95 million. Overall, the nominal growth rate was 16.81% lower than the rate recorded in the second quarter of 2019 and 14.81% lower than recorded in the first quarter of 2020. Consequently, for the first half of 2020, real GDP declined by 2.18% year on year, compared with 2.11% recorded in the first half of 2019.
The decline was largely attributable to significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic. The domestic efforts ranged from initial restrictions of human and vehicular movement implemented in only a few states to a nationwide curfew, bans on domestic and international travels, closure of schools and markets etc. which affected both local and international trade. The efforts, led by both the Federal and State governments, evolved over the course of the quarter and persisted throughout.
The oil sector accounted for 8.93% of aggregate GDP and recorded a real growth of 6.63% (year-on-year) in Q2 2020 indicating a decrease of 13.80% relative to the rate recorded in the corresponding quarter of 2019. Conversely, the non-oil sector accounted for 91.07% of aggregate GDP in the second quarter of 2020 but declined by 6.05%. Activities in the non-oil sector were driven by Financial and Insurance (Financial Institutions), Information and Communication (Telecommunications), Agriculture (Crop Production) and Public Administration, while the highest negative growth was experienced in the Transport and Storage, Accommodation and Food Services, Construction, Education, Real estate and Trade among others.
Developments in the Capital Market
The NSE All share index was 24,479.22 as at 30 June 2020, down -18.31 percent over the corresponding period in 2019. Total market capitalization was N28.62 trillion in the reporting period. All the NSE market indices recorded a mix of positive and negative performance, with the highest performer being Construction/Real Estate with 49.18 percent and the lowest being Oil & Gas with -26.04 percent. The bond market capitalization increased to N13.40, representing a 25.90% increase. The debt instruments for Q2 2020 include FGN Bond at N11.24 trillion (72.73%), FGN savings bond at N12.98 billion (0.08%), FGN Sukuk at N362.56 billion (2.35%), Green Bond at N25.69 billion (0.17%), Nigeria Treasury bill at N2.76 trillion (17.86%), Nigeria Treasury bond at N100.99 billion (0.65%), and promissory note at N951.74 billion (6.16%) totalling N15.46 trillion.
Developments in the Money Market
The Central Bank of Nigeria (CBN) changed the Monetary Policy Rate (MPR) to 12.50% in May, 2020. Cash Reserve Ratio (CRR) on private sector deposit was increased to 27.5%. The monetary indicators were deposits of various maturities closing at a range of 4.90% – 7.63% in the period under review compared to a range of 8.81% – 10.57% in the previous year. The interbank rates closed at 5.75%, downwards from 8.38% recorded in Q2 2019. The prime and maximum lending rates closed at 15.65% and 30.57%, respectively.
PensionNigeria Pension Fund Administrators (PFAs) Performance as at Q2, 2020
Notwithstanding the challenges in the second quarter of 2020, the performance of all Pension Fund Administrators (PFAs) in Nigeria as at June 2020 was GREEN for all PFAs, except one PFA, which had a negative Return on Investment of -0.19% for Fund I as at June 2020.
Check out performance of all PFAs as at June 2020 here
Also check out,
Performance of all PFAs as at July 2020
Performance of all PFAs as at August 2020
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