Analysts Predict Liquidity Boost with Maturing Fixed Income Instruments

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By Nume Ekeghe

With over N5 trillion worth of treasury bills and bonds expected to mature in the second half of 2020, the Chief Investment Officer Sigma Pensions, Mr. Pabina Yinkere has predicted that the increased liquidity will boost the economy for the rest of the year.

He said this recently at a Webinar organised by Sigma Pensions, where he spoke on the investment climate in Nigeria.

He said: “If we look at treasury bills and bonds that are going to mature between now and December, it is over N5 trillion, which are things that we have invested in and would be paid back to us in cash. So, to keep the investments going, we have to re-invest this into the market.

“And if we look at the federal government borrowing for this year, they plan to borrow N2 trillion in total. So, with N5 trillion against N2 trillion, you can see that the demand for investment would become very high and it would then affect returns going forward.”

Further speaking on the effect it would have on the stock market, he said: “If we then look at the stock market, the Nigerian stock market is highly correlated to oil prices as we have seen decline in oil price.

“Following the advent of Covid-19, you would see that the market hasn’t done very well.

“However, because of the share size of liquidity, there is a scope that this market would probably not decline as much as one would have expected but then what it still means is that because companies are going to be facing challenges and having troubles with growing revenue and making profit, equity investment may not be very attractive long-term opportunities at this time.”

Reassuring contributors on the safety of pension funds, he said: “Because of the way the pension scheme has been run and operated, you would find that from Pencom’s investment regulation, it provides some level of security around pension instrument.

“Yes, we may not grow as much as we want, we may not present the returns that are spectacular above inflation, but one thing you can guarantee is that we will present positive returns and these returns would ensure that the capital that contributors have provided is not eroded.”

He added: “Pension industry has very good risk management policies built in and around it and even within Sigma, we have put in place very robust risk management policies around our investments.

“We do all of this scenario planning when we make our investment at the start of the year, we do plan for the worst and in doing that, it helps us to put ourselves in a position where we are able to react and protect the portfolios in the event, we find ourselves in the worst scenario that is playing out.

“Yes, it is going to be tough, but we would do our best as fund managers to ensure that funds are protected and we return as good enough as the market can deliver on investment return,” he added.