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Thursday, June 8, 2023

Nigerian Pension Funds Unrealized Losses on Bonds, Equity Portfolio hit N116.7bn in Q1

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The total unrealized losses on pension Funds retirement savings account (RSA) ‘Active’ Funds (Fund I, II & III) in Q1 2021 amounted to N27.11 billion compared to unrealized gains of N169.18 billion recorded in Q4 2020, while the total unrealized losses on bonds in the RSA Active portfolio amounted to N89.63 billion in Q1 2021 due to rising yields observed throughout the quarter.

Both portfolio (equity and bonds) unrealized losses totaled to a cumulative N116.7 billion, data from the regulator PENCOM shows.

For the equity portion of the portfolio, unrealized losses were attributed to general depreciation in the prices of stocks as the NGX-Pension Index depreciated by 1.88 percent in Q1 2021 compared to an appreciation of 50.09 percent recorded in Q4 2020.

A significant proportion of unrealized losses in Q1 2021 was attributed to depreciation in prices of the following stocks: Guaranty Trust Bank, Dangote Cement, Zenith Bank and Access Bank.

The performances of the RSA “Active” Funds for Q1 2021 were negatively impacted by depreciation in bond and equity prices.

The S&P/FMDQ Nigeria Sovereign Bond Yield Index increased to 9.90 percent as at 31 March 2021 from 6.16% recorded as at 31 December 2020.

The average rate of return (annualized) for RSA Fund I, II, III and V were -4.03%, -0.55% -0.65% and 5.38% respectively.

The recorded performances were lower than the average rate of returns of 41.49%, 31.97%, 22.23% and 2.50% achieved by the respective Funds in Q4 2020.

The impact of the depreciation in bond prices was significant in RSA Funds I, II and III as they recorded losses in Q1 2021.

The losses were more significant in Fund I with highest allocation of 21.45 percent to variable income securities (including marked-to-market bonds) compared to Funds II and III with 18.13 percent and 10.35 percent allocation to variable incomes securities respectively.

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