Analysis of Pension Operating Environment Q4 2020

March 30, 2021 PensionNigeria

National Pension Commission (PenCom) has released its 4th quarter 2020 report for the Pension Industry. PenCom in its report gave an analysis of the pension operating environment for Q4, 2020. The data used for the analysis is sourced from the National Bureau of Statistics: Nigeria Gross Domestic Products Report Q4 2020, Central Bank of Nigeria: Monthly Economic Report and the Nigerian Stock Exchange.

Below is the analysis;

Macroeconomic Development

Nigeria’s aggregate Gross Domestic Product (GDP) stood at N43,564,006.29 million in nominal terms in the fourth quarter of 2020. This indicated a year-on-year nominal growth rate of 10.07% compared to N39,577,340.04 million aggregate GDP recorded in the fourth quarter of 2019. In real terms, the GDP grew by 0.11% (year-on-year) in the Q4 2020, representing the first positive quarterly growth since the beginning of the year. Though weak, the Q4 2020 growth rate was higher by 3.74% compared to the rate recorded in Q3 2020.

This is reflective of the slow return of economic activities following the easing of restricted movements witnessed in the preceding quarters, due to the Covid-19 pandemic. On a quarter on quarter basis, real GDP growth was 9.68% indicating a second positive consecutive quarter on quarter real growth rate in 2020 after two negative quarters.

In Q4 2020, the oil sector contributed 5.87% to total real GDP, down from the 8.73% recorded in the preceding quarter of 2020. The average daily oil production was 1.56 million barrels per day (mbpd) representing 0.11mbpd decline when compared to the 1.67 mbpd daily average production recorded in the Q3 2020.

On the other hand, the non-oil sector grew by 1.69% in real terms in Q4 2020, which indicated an improvement when compared to the 2.51% growth rate recorded in the preceding quarter. In real terms, the Non-Oil sector contributed 94.13% to the nation’s GDP in Q4 2020, higher than the 91.27% recorded in the Q3 2020. Growth in this sector was driven mainly by economic activities in the telecommunications, agriculture, construction, financial services and public administration.

Developments in the Capital Market

The NSE All Share Index closed at 40,270.72 and Market Capitalization appreciated 3.83% to close at N21.06 trillion during the quarter under review. In the equities market, trading activities were mixed as total turnover volume of 1.806 billion shares worth N25.966 billion in 14,634 deals were traded by investors on the floor of the Exchange.

At the Government securities market, NTBs and long-term FGN Bonds were issued at the primary market by the Debt Management Office (DMO). NTBs of 91, 182 and 364 day tenors, amounting to N318.42 billion, N1,049.06 billion and N318.42 billion, respectively, were offered, subscribed and allotted. The bid-cover ratio of 3.9 for 91-day, 2.5 for 182-day and 3.4 for 364-day tenor, reflected investors preference for instruments with shorter maturities.

The developments were due, mainly, to the recession witnessed in the economy in Q3 2020, amid rising uncertainties and investors sentiments towards fixed income investment. There was no repayment of matured NTBs during the review period. FGN Bonds of 15- and 25-year tranches were re-opened and offered for sale in the review period. Term to maturity of the Bonds were 14 years, 4 months to 24 years, 8 months. Total amount offered, subscribed and allotted, were N80.00 billion, N184.74 billion and N80.00 billion, respectively. The bid and marginal rates on all tenors were 6.1% and 5.4%, respectively.

Developments in the Money Market

The Central Bank of Nigeria (CBN) in its monthly Economic Report noted that the financial system had sufficient liquidity, which made financial intermediation relatively more efficient. This led to the decline in key lending and money market rates in the review period. Repayments of matured CBN bills, Federal Government (FGN) bonds and Nigerian Treasury bills, as well as fiscal disbursements to the three tiers of Government (FAAC) were the major sources of the ample liquidity in the system during the quarter under review.

The CBN also moderated liquidity flow through OMO and discount window activities with tenors of the instruments ranging from 117 to 362 days. A total amount of N230 billion was offered, N1,287.64 billion was subscribed to and N210.90 billion allotted, with a bid and stop rate of 4.6%. Repayment of matured CBN bills stood at N821.75 billion, translating to a net injection of N610.85 billion through this medium.

Check below for PensionNigeria breakdown of all the important aspects of the PenCom 4th Quarter 2020 Report

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DONT MISS PenCom Q42020 Quarterly Report Series
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Appointments to Pension Operators’ Boards in Q4 2020
PenCom issued 1,877 organizations Compliance Certificates in Q42020
19 Employers paid N170 million Penalty for late Remittance of Pension Contribution
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Biggest PFAs by RSA Registrations December 2020
Update on the RSA Transfer System (RTS), 2,799 RSA holders Change PFAs
Pension Operators paid N90.99 billion Retirement Benefits Q4/2020

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