Nigerian pension funds shift to bonds as currency woes deter equity investors

ABUJA (Capital Markets in Africa) – Nigerian pension funds have been selling equities and shifting to local bonds despite cheap valuations as illiquid currency markets limit foreign participation in the stock market.

Dave Uduanu, who manages 220 billion naira ($724 million) for Pension Alliance Limited, said his fund had cut its exposure to Nigerian stocks to 10 percent this year, from 20 percent last year, and increased allocation to local treasury bills and government bonds.

Nigeria, Africa’s biggest economy, is facing its worst recession in 25 years, brought on by low oil prices, which has seen foreign investors flee its financial markets, causing chronic dollar shortages and creating risk aversion among local funds.

Uduanu said investing in stocks had become unattractive because foreign investors, which used to dominate the Nigerian market, have stayed away amid concerns on how to repatriate funds. Corporate earnings have also been poor as firms struggled to source dollars to pay for imports, he said.

“Asset allocation is getting more conservative so equity allocation has dropped. Pension fund investors have become more risk averse,” Uduanu told Reuters on the sidelines of a pensions fund conference in Abuja.

Local funds with no currency risk were preferring treasury bills offering yields of around 18 percent, Uduanu said.

Read more: Nigerian pension funds shift to bonds -Reuters Africa News