New NGX, PenCom index deepens PFAs’ equity market participation

Business a.m

The collaboration between the Nigerian Exchange (NGX) and National Pension Commission (PenCom), which resulted in the launch of the market gauge to track pension investments, has been considered an opportunity for pension fund administrators (PFAs) to deepen their participation in the equities market.

Jude Chiemeka, acting chief executive Officer, (NGX), while commending the launch of the NGX Pension Broad Index, said it enhances opportunities for pension investments as the index provides a broader benchmark for tracking equities investment by the pension industry.

Chiemeka  explained further that the NGX Pension Broad Index will not only help guide investment decisions, but also play a key role in stabilising the Nigerian pension industry.

He said: “The collaboration between NGX and PenCom underscores a shared commitment to fostering transparency, compliance, and growth within the Nigerian capital market.

I am pleased with the approval granted by the National Pension Commission for the NGX Pension Broad Index to serve as the benchmark index for Nigeria’s Pension industry equity investment portfolios.

This further solidifies the credibility of the index as a reliable yardstick for evaluating the equity performance of pension industry investments.”

The NGX Pension Broad Index is an innovative tool designed to track the performance of equity securities that meet specific criteria tailored to the pension industry. The index tracks the performance of equities that are both profitable and pay dividends, as well as those that adhere to other requirements such as share liquidity and minimum market capitalisation. This allows for a comprehensive and unbiased assessment of the overall performance of the pension industry.

In contrast to other equity indices, the NGX Pension Broad Index is not limited by the number of stocks it can include. This means that the index can accommodate a large number of equities, providing a more comprehensive and representative view of the pension industry. Currently, the index includes 84 equities that meet the strict requirements of profitability, dividend payment, liquidity, and market capitalisation. This comprehensive approach ensures that the index is fully aligned with the provisions of the Pension Reform Act of 2014 and the amended regulation on the investment of pension fund assets proposed by PenCom.

According to Chiemeka, the NGX Pension Broad Index has performed well since its launch last year. This, he stated, is due in part to its diversified composition, which includes a variety of high-quality stocks from key sectors such as banking, insurance, oil and gas, consumer goods, and industrial goods.