The Nigerian Exchange in partnership with the National Pension Commission and the Pension Fund Operators Association of Nigeria has held a webinar to deepen knowledge of the NGX Pension Broad Index.
The webinar, which was held on Wednesday, featured a panel discussion by stakeholders in the pension industry, who highlighted the importance of the benchmark for the industry.
In his opening speech at the webinar, the acting Chief Executive Officer of the NGX, Jude Chiemeka, who was represented by the Acting Divisional Head of Capital Markets, NGX, Tony Ibeziako, said that the exchange had been at the forefront of providing indexes for the capital market for decades.
He said, “We believe that this webinar will be of immense value to the stakeholders. The NGX has been at the forefront of providing benchmarks for the Nigerian capital market for over 40 years. Over the years, the exchange has been proactive in providing more indexes. Now, we have over 20 benchmarks with five of them being sectoral.
“The year-to-date gains of the NGX pension broad index are 32 per cent. The NGX thought to socialise the market with this index hence this all-important webinar.”
In his presentation, the Chairman of the NGX Index Governance Committee, Abimbola Babalola, said that the benchmark offered pension fund administrators a reference point to measure their performance as well as broaden their choice of securities.
“With this broad index, PFAs now have a benchmark to compare their performance against. It is also like a guide for investors. Instead of cheery picking, they can look at the constituents of the NGX broad benchmark and decide on which stock to pick,” Babalola, who is also the head of Market Surveillance, NGX Regulation.
According to Babalola, the broad index brings in more than 40 securities and has none of the limiting requirements of the NGX Pension Index.
“The index tells you all the securities that have met PenCom requirements. Fundamentally, we screen these companies first. You can use it to predict the direction of the economy. This index can guide you in measuring the import of government policies. The index is a forward-looking one,” he added.
The Head of the Investment Supervision Department, PenCom, Abdulqadir Dahiru, said, “We started on this journey with the NGX and it culminated in the NGX Broad Pension Index which provides diversification. From 40 stocks in the NGX Pension Index, we are now talking about 84 securities. We believe it is more representative and gives PFAs choices and helps them measure their performance.”
He stressed the need to focus on capacity building.
“I think some of our PFAs have weaknesses around their investing team, so I will encourage the market to improve capacity, and understanding so that they can go into the market with a bit of certainty. There are some stocks which we have brought in which PFAs were not even looking at,” he enunciated.
For the Chief Investment Officer of Shell CPFA, Ehis Uzenebor, the decision to intentionally push for benchmarking is a testament to the growth that the market has achieved.
“With appropriate benchmarking, fund managers can evaluate themselves. The board and trustees can also evaluate how fund managers can. It provides an objective basis for comparison across the industry.
“When it comes to the role of risk management, if you appropriately benchmark, then to some extent, risk management appears elevated. It is also useful for the regulator in the sense that the regulator can ascertain and evaluate the appropriate relevance of guidelines from time to time,” he declared.
