Nigerian Stock Exchange reviews pension index, introduces new regulations

The logo of the Nigerian Stock Exchange is pictured in Lagos, Nigeria November 9, 2016. REUTERS/Afolabi Sotunde
The logo of the Nigerian Stock Exchange is pictured in Lagos, Nigeria November 9, 2016. REUTERS/Afolabi Sotunde

The Nigerian Stock Exchange (NSE) on Tuesday announced that it has reviewed the eligibility criteria for the NSE Pension Index (“The Index”).

The Nigerian bourse said the review was in line with changes in the regulatory and market requirements.

A statement by the NSE said the amended methodology and rebalancing will be effective on Wednesday July 1.

According to Abimbola Babalola, Chairman, Index Governance Committee of the NSE, the review was designed to make the platform serve its diverse stakeholders.

“The review of the Index was made imperative by the need to ensure that it continues to represent the appropriate benchmark for evaluating the Pension Fund Assets equity portfolios and remain suitable for all market stakeholders,” Mr Babalola said.

“The review further takes into consideration the changes in guidelines as specified in the Pension Reform Act 2014 and Amended Regulation on Investment of Pension Fund Assets as advised by the National Pension Commission (PENCOM) as well as market requirements in the amendments”.

Review

PREMIUM TIMES’ review of the changes showed that in terms of Investability weighting, companies to be included must have Free Float Factor of at least 5 percent. In the new arrangement, there is free float consideration to be aligned with the Exchange’s free float rules and definition.

In terms of profitability criteria, companies to be included must have an operating track record of having made taxable profits for at least three out of the five years preceding the investment; and must have paid dividend or issued bonus at least one out of the five years. In the new arrangement, dividend payment or bonus issue is now “at least one and no longer two out of the five years”.

READ ALSO: Coronavirus: Too early to dip into Nigeria’s pension funds – PTF

In terms of the security cap, the NSE says maximum weighting of an individual listed equity has been reviewed from 4.5 percent to 10 per cent.

The Nigerian Stock Exchange introduced the Pension Index and exposed it to the investing public in 2015.

The move was designed in order to deepen the market.

The creation of the NSE Pension Index has provided benchmarks tracking mechanisms for Pension Fund Administrators and other Users that follow the PENCOM guidelines.

The NSE pension tracks the top 40 companies in terms of market capitalization and liquidity. It is a total return index and is weighted by adjusted market capitalization, a capping factor and a free float factor.



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