BROKERS DIVIDED OVER CALLS FOR PFAS 20% INVESTMENT IN NSE

BY NKIRUKA NNOROM
Stockbrokers are divided in their submission on the value derivable from investment of 20 per cent of Assets Under Management (AUM) by Pension Fund Administrators (PFAs) in the capital market as suggested by business mogul, Alhaji Aliko Dangote.

Though a good number of them agreed that the Nigerian Stock Exchange (NSE) was an ideal vehicle for preservation of capital as being sought by PFAs, a lot more stated that the market is rather shallow to absorb as much as 20 per cent of funds from that sector.

Dangote had recently advised the National Pension Commission (PENCOM) to ensure that 20 per cent of PFAs funds were invested in the capital market, saying that such investment would reinvigorate activities in the market. According to Dangote, 'Any country that does not have a robust Capital Market will have a weak economy' he said.

Reacting to the call, the Managing Director, Lambert Trust and Investment Company Limited, Mr. David Adonri, said it was doubtful if enough quality assets class exists in the capital market that would satisfy the investment appetite of Pension administrators.

Adonri argued that though the capital market offers safe haven for investors seeking preservation of capital, investing as much as 20 per cent of pension funds assets in the capital market might cause equity bubble.

'Since Pension Fund Administrators continuously seek investment opportunities that meet their expectations of safety, liquidity and profitability, it is doubtful if enough premium quality equities currently exist in the Nigerian market to absorb 20 per cent of Pension Fund assets allocation without provoking a bubble in the market,' he said.

He, however, agreed that investment in debt instruments was more ideal for Pension Funds where preservation of capital was a cardinal goal, advising, 'within equities, Pension Funds should only target premium blue chip stocks in line with regulatory investment guidelines.'

On his own part, Tunde Oyediran, an analyst with Deloy Consulting, observed that investors' confidence would be restored through such investment.

He pointed out that capital market would be a good investment window for the funds deducted from workers salaries, especially at this time when most stock prices are at their lowest ebbs.