Nigeria raises stock market limit in new pension guideline

Nigeria has introduced a new structure for pension assets that will raise the maximum investment in equities for some funds to 30 percent from 25 percent, according to new guidelines set out by the regulator and seen by Reuters.
The changes could give a further boost to Nigerian stocks, which were on track for their strongest weekly gain for 11 months on Thursday as trade volumes rise. Local funds have piled into equities recently in the hope that foreign investors will return as liquidity in the currency market improves.
Under the National Pension Commission's new guidelines, pension managers will be allowed to create up to four funds which can take on different levels of risk. The highest risk funds will be able to invest up to 30 percent in equities while the least aggressive can avoid stocks altogether.
Up to 75 percent of a fund's portfolio may be invested in variable income assets including equities, the pension commission said, with minimum exposure set at zero.
Olalekan Olabode, head of research at Vetiva Capital said the new regulation would help equities sustain their rally after stocks gained for a 10th consecutive day on Thursday.
Nigeria's stock market, once a darling of frontier market investors, has struggled to sustain a recovery after a sharp drop in oil prices, the country's economic mainstay, forced the central bank to introduce currency curbs in 2015.
The bank has started to gradually ease the curbs, which led investors to flee.
The pension commission said scheme holders can only get exposure to an aggressive fund with higher equity limits on request, in a bid to apply some breaks on retiree savings but also help managers generate returns above inflation.
It also placed a limit of 10 percent of total industry funds to be invested in any single security issued by a company and 45 percent in any particular industry.
Nigeria's pension funds have been growing at a slower rate since 2015 as funds become more conservative and a recession in Africa's biggest economy hit asset returns and forced companies to lay off workers.
Three years ago, the regulator expected pension assets to triple by 2016 to $70 billion, as more people in the small business sector signed up to schemes. But that expansion has failed to materialise.
© Reuters News