Monday, July 9, 2018

punch
financial
Financial Market Watch
…for the week ended July 6, 2018
Equity market - Listed securities on NSE
The equity segment of the Nigerian stock market succumbed to
profit-taking activities and weak demand despite the kick-off of
the pension multi-fund structure. Consequently, the NSE All-Share
Index and market capitalisation depreciated by 1.71 per cent to close
the past week at 37,625.59 and N13.630tn, respectively. With this, the
NSE ASI has posted a negative return of 1.61 per cent year-to-date.
In the same vein, most sectored gauges fell: the NSE Banking Index,
NSE Consumer Goods Index, NSE Oil/Gas Index and NSE Industrial
Index decreased by 0.07 per cent, 3.49 per cent, 2.87 per cent and 2.77
per cent, respectively to close at 475.74 points, 895.36 points, 313.95
points and 1,953 points, respectively; however, the NSE Insurance
Index rose by 0.53 per cent to close at 151.23 points.
This week, we expect the market to trade slightly sideways as
investors, especially the Pension Fund Administrators, are likely to
take advantage of the relatively discounted stock prices.
NASD unlisted securities
The NASD OTC Market garnered momentum in the past week
as the NASD USI increased significantly by 1.72 per cent to close at
662.89 points (as against the 651.69 points recorded in the previous
week). Consequently, the market capitalisation increased by 1.72 per
cent to close higher at 448.60bn compared to 441.02bn recorded in
the previous week.
Money market
The OBB and overnight rates rose higher to 11.33 per cent and 12.92
per cent, respectively. This came on the back of a squeeze in system
liquidity as banks funded for their FX bids at a retail auction by the
Central Bank of Nigeria.
Outflows came by way of retail FX sales approximately N300bn and
treasury bills primary auction worth N102.31bn. These were slightly
moderated by inflows from refunds of the last auction of approximately
N100bn and maturing treasury bills worth N409.15bn.
We expect rates to remain slightly pressured at the beginning of
the week as banks are expected to fund for another round of FX sales
in the wholesale market, but moderate slightly on maturing treasury
bills worth N313.56bn.
Bonds market
The bond market remained relatively flat with most activities still on
the 2036s. There were, however, slight buying interests on the 2037s,
which compressed yields marginally by a single basis point.
We expect the market to remain relatively stable this week as market
players have shown renewed buying interests at current levels. Our
forward expectation for yields, however, remains slightly bearish due
to continued EM selloffs, slightly higher year-end inflation expectations
and expected increase in the level of FGN borrowings.
Treasury bills market
The T-bills market traded on a firmly bullish note with yields
declining by an average of 30 basis points in the past week. This came
on the back of excess inflows from T-bill maturities in the previous
session, which spurred some buying interests in the market.
In the week under review, the CBN auctioned treasury bills worth
N102.31bn via the primary market. The stop rates for the auctioned
T-bills moved in mixed directions across the tenor buckets: the 91-day
stop rate moderated to 10 per cent (from 10.20 per cent), while 182-day
stop rate was flat at 10.50 per cent; however, the 364-day stop rate rose
to 11.51 per cent (from 11.50 per cent).
We expect the market to remain slightly bullish this week as we
anticipate that a resolution of the recent FAAC standoff will further
moderate liquidity pressures in the system. This is, however, barring
a renewal of OMO auctions by the CBN.
Foreign exchange market
The interbank rate remained stable at its previous rate of N305.70/$,
with the CBN’s external reserves increasing by 0.36 per cent to
$47.80bn from $47.63bn on the 13th of June.
The NAFEX rate depreciated further by 0.09 per cent to another
high of N362.58/$, last seen on August 14, 2017, when the market
closed at N362.50/$.
In the parallel market, cash rates appreciated by 40k to N359/$,
while the transfer market rate remained stable at N363.50/$.
In the past week, the CBN injected a total of $210m into the foreign
exchange market, of which $100m was allocated to Wholesale (SMIS),
$55m was allocated to Small and Medium-scale Enterprises, and $55m
was sold for invisibles.
We expect a relatively stable exchange rate at most market segments
as the CBN continues its intervention coupled with increased dollar
liquidity at the BDC segment.
•Dr Bernard Ilori
E-mail – woleilori@gmail.com
Mobile: 09030004477 (SMS/WhatsApp only)
MONDAY, JULY 9, 2018
Retirees kick as pension
operators slash lump sum to 20%
Many retirees under the
Contributory Pension
Scheme are daily expressing
their displeasure over their
inability to access at least 25
per cent of the balance in their
Retirement Savings Accounts,
which is contrary to their
expectation, investigation has
revealed.
Some retirees, who spoke
to our correspondent on the
development, threatened to
take up their Pension Fund
Administrators for introducing
the initiative without making
their intentions public for
stakeholders to understand
the implications.
According to them, the prior
information made available to
them was that retirees could
access either 50 per cent or at
least 25 per cent of their RSA
balance, even when it was
uncommon to see the PFAs
giving out 50 per cent.
A retiree, Kayode Ibrahim,
said he was disappointed when
his PFAs denied him the 25 per
cent lump sum payment, which
he felt was his right.
He stated, “I just retired
and went to my PFA last week
to process my pension, but
they calculated my lump sum,
which amounted to 20 per
cent. I rejected that money and
insisted that they must give me
25 per cent minimum; they
told me my monthly pensions
will be lower than 50 per cent
of my last salary if they should
give me 25 per cent.
“Yet, the amount they want
to be paying me as monthly
pension is just about 18 per
cent of the last salary I got
before I retired. If they cannot
give me a monthly pension
that is worth 50 per cent of
my last salary, why should
they not give me my 25 per
cent lump sum?”
Another retiree, James
Egerue, who spoke with our
correspondent, said that he
retired early this year and went
to his PFA to know how much
he would be paid as lump sum.
He said, “They agreed to
give me 25 per cent, but I did
not fill the form on time. When
I went back recently, I got a
rude shock as they said they
would not give me 25 per cent
lump sum anymore, but just
20 per cent.
“Even though they offered to
pay higher monthly pensions
than before, the increase is
insignificant because they still
want to be paying me monthly
pension, which is just 20 per
cent of my last salary. I will
write a petition against them.”
While the Part 1 Section 4(1)
C old Pension Reform Act, 2004
provided that 50 per cent of the
annual remuneration should
be considered in retirement
iNSIDE
A new template recently given to the Pension Fund Administrators
by the National Pension Commission for the calculation of retirement
benefits to Contributory Pension Scheme retirees has led to the
reduction in lump sum being paid out and this is generating concerns
among some pensioners, NIKE POPOOLA writes
• Acting Director-General, PenCom, Aisha
Dahir-Umar
benefit computation, this
provision was not mentioned
in the amended PRA 2014.
Part III Section 7(1) A of the
2014 version of the law states,
“A holder of a RSA shall upon
retirement or attaining the
age of 50 years, whichever
is later, utilise the amount
credited to his RSA for the
following benefit: withdrawal
of a lump sum from the total
amount credited to his RSA
provided that the amount left
after the lump sum withdrawal
or annuity for life in accordance
with extant guidelines issue
by the commission from time
to time.”
The major parameters used
in the template to calculate
the monthly pensions are the
date of birth, RSA balance, last
salary before retirement and
gender of the retiree.
Some operators, who spoke
with our correspondent, said
that the new template became
imperative as the PFAs were
overwhelmed by the number of
retirees who regularly came to
their offices to ask for another
lump sum after exhausting
the initial one they got at
retirement, which is the only
one allowed by law.
From their observation,
when retirees were given huge
lump sums, they squandered
the money within months and
soon return to penury.
“We feel is it better to give
them little lump sums and
bigger monthly pensions,
because when they live long,
we will be able to manage the
funds better for them,” an
operator said.
But a retiree, Tunde
Ekundayo, who faulted the
defence of the operators, noted
that it was wrong to categorise
all retirees as frivolous
spenders who could not be
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• Adedeji
prudent with money.
“Many of us already have
plans for the lump sum and
when they just slash the money
arbitrarily like that, it leaves us
with little or nothing to do with
the money,” he added.
Last year, Senator Aliyu
Wamako, representing Sokoto
North Senatorial District in the
National Assembly, sponsored
a bill to amend the PRA 2014
to permit retirees to withdraw
a definite rate of 75 per cent of
the value of their retirement
savings upon retirement,
leaving only 25 per cent to be
spread over their expected
years of retirement as periodic
pension payment.
The pension operators, who
faulted the bill, had said it
was doubtful if the 25 per
cent balance in the retiree’s
RSA after deduction of 75
per cent lump sum would, if
spread through the retiree’s
expected lifespan, be adequate
to reasonably cater for his/her
livelihood in old age.
The President, Pension
Fund Operators Association
of Nigeria, Mrs Ronke Adedeji,
said the National Pension
Commission introduced
the new template for use
effective May 15, 2018 as an
improvement on the existing
template.
While explaining the
characteristics of the new
template, she stated, “Unlike
the old template, the new
programmed withdrawal
template has factored in
payment of arrears of pensions
to retirees who did not access
their benefits immediately
after retirement. These retirees
are paid pension arrears for
the period between their
retirement dates and the date
they access their funds.
“Minimum lump sum
37
payment has been reviewed
from the initial 25 per cent
to 20 per cent of the RSA
balance, while the existing
maximum of 50 per cent
lump sum was repealed. The
purpose of the reduction to 20
per cent is to enable retirees
with smaller funds to access
more periodic pensions for
long term sustenance rather
than collecting a huge lump
sum today at the expense of
their future; while those with
large sums can potentially
access more than 50 per cent.”
The PenOp boss added,
“The new template contains
salary structures of all Federal
Government employees to
further standardise benefits
computation. The minimum
of 50 per cent of the final
annual total emolument has
also been recaptured in the
new programmed withdrawal
template as 50 per cent of the
total annual gross salary of
retirees. This is to ensure that
retirees have robust periodic
pensions to cater for their
needs at retirement.
“The new template
programmes retirees from
a minimum age limit of 50
years and above, while the
maximum age limit of 65
years that existed in the initial
template has been removed.
This allows older retirees to
earn more lump sum/pension
at retirement.
“By and large, the new
template has been put in
place to bring about an
improvement in the standard
of living of every retiree.
However, some perceive this
change as unfavourable if
there is a drop in their lump
sum. We are confident that
over time, retirees will come
to appreciate this.”