The Nigerian capital market is poised to witness more patronage by Pension Funds Administrators (PFAs) next year.
This is as the National Pension Commission (PenCom) plans to permit PFAs to invest up to 50 per cent of their pension assets contributed by young people in the market.
Going by the PenCom Act, PFAs' exposure to the capital is supposed to be 25 per cent. But the stock crisis that started in 2008 and other factors have prevented the PFAs from reaching that benchmark.
Many of them invest less than 10 per cent of their assets in the market.
But speaking in Lagos, Head, Investment Supervision Department of PenCom, Mr. Ehimeme Ohioma, said the organisation would soon allow up to 50 per cent of pension assets of young contributors to be invested in the capital market.
Ohioma, who spoke at the 16th Annual Stockbrokers Conference, organised by the Chartered Institute of Stockbrokers (CIS), noted that this would be allowed because young contributors have higher risk than old contributors, who have low risk because of their age.
“However, one thing is to fix the limit and the other is for the PFAs to invest. Before they invest, PFAs will look at market discipline of operators and other issue.
"So it is not sufficient for the PenCom to increase the limit. The regulators and operators should do things that would attract investment into the market,” he said.
According to him, apart from increasing the limit for the capital market to attract more patronage, Ohioma said certain issues must also be addressed.
He cited the corporate governance practices of operators and companies as an example. He noted that many companies still have weak corporate governance structure, stressing that such weaknesses should be addressed.
He added that weak regulatory and supervisory oversight in the market should also be strengthened.
“Although there has been some improvement in this area, we need to improve on enforcement of rules to ensure that every stakeholder plays by the rule of the game. Market discipline is very key,” he said.
The PenCom chief noted that quoted companies should also do more in the area of information disclosure, just as he said there was need to bring more products into the market for PFAs to have access to variety.
According to him, all the sectors of the economy ought to be represented on the exchange, unlike now where
critical sectors such as the tele-communications, downstream sector of the oil industry and agriculture sectors of the economy are not well represented.