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00:00 Now, data from the January unaudited report in NIDRA's pension funds industry portfolio shows
00:05 the value of pension fund in dollar terms fell by about 29% to $14.3 billion in January this year,
00:13 compared to the $20.4 billion recorded in December last year.
00:17 Ogochai Agoda, Chief Executive Officer of Pension Fund Operators Association of NIDRA,
00:22 joins me now for more on this discussion. Thank you so much for joining us on the show today,
00:25 Mr. Agoda. Let's start off really now with this dip we're seeing here, calculating in dollar terms,
00:31 the drop to 9%, and what's driving this? Your reading of the numbers?
00:35 I think the first thing is that, you know, we live in Nigeria, we spend in NIDRA,
00:39 so I typically don't like to change the NIDRA assets to dollars.
00:44 The math is a math in there.
00:45 But I think it's obvious, because of the depreciation that happened in December, January,
00:49 you know, everyone knows what happened with the NIDRA. So that's, of course, if you want to change
00:55 it. But in terms of NIDRA terms, the growth has been very strong, keeps on growing. So I don't
00:59 like to do the change because we spend here, we invest here. So I like to keep it on NIDRA terms.
01:05 That's the best calculation in NIDRA terms. Now let's talk about NIDRA terms. Now, we've seen
01:10 the CBN also take certain moves to help prop up the local currency as well now. But how would you
01:15 save the currency as far as, yes, this week, we've seen a gradual rebound. Questions have been around
01:21 the fair value of the NIDRA and how quickly will we inch closer to that 1,200 NIDRA rate for you
01:28 and assessment of what's going on? Yeah, I think the honest truth is that countries like Nigeria,
01:34 especially countries that are import dependent, ever so often will have to face this devaluation
01:39 issues and because we don't export as much as we import. So for us as pension funds, we definitely
01:44 would like to invest offshore, at least a portion. And we've been pushing for that for a number of
01:49 years and we continue to do that. There's a lot of work that is going on under the scenes. And
01:52 Nigeria is probably one of the only countries in the world that the pension funds don't invest
01:57 offshore because it doesn't make sense. You are diversifying, you are hedging against currency
02:01 devaluation. And then the markets, the depth of the local market might not be enough to be able
02:06 to take all those investments. So it's something we need to do. If you look at countries like Botswana,
02:10 70% of the pension fund assets can be invested offshore. South Africa, 45%. If you look at
02:16 LATAM, like Brazil, 40%. Chile, 90%. So for us, there has to be a case for us to be able to invest
02:22 a portion offshore because it does help when things like this happen. Yes, especially hedging
02:27 against volatility as we see panning out here. But let's talk about some of the developments that
02:32 have panned out here. Out of the 19.5 trillion that we've seen in terms of total assets under
02:37 the contributory pension scheme now, we've seen the bulk of that now being invested in government
02:42 securities. With the move from the CBN, we're going to see bigger auctions. We've also seen
02:47 the T-bills and bond auctions so far. These are bigger sizes in terms of investment. How do you
02:53 see the trajectory going on here? Yeah, I think traditionally, the bulk of the assets, local
02:58 pension funds have always been invested in government bonds or bills. And I don't think
03:02 it's peculiar to Nigeria. It's global. But I think maybe the percentage is typically about 65%,
03:07 which is like the maximum they can invest in. And I think that percentage will continue.
03:12 The quantum will definitely increase as the contributions increase, but the percentage
03:17 will typically be at the limit of about 65%. I think what we now need to see is what makes
03:23 of the other 35% and how is that spread. And it's also important at this point in time now,
03:29 when we're looking at strategies, also crowd and much more private sector investment. We've also
03:33 seen data here showing that the investment in infrastructure funds by PFAs have also risen
03:38 about 32% in January this year. Now, when we're looking at the bigger picture for the full year,
03:43 how large will it be? I think with infrastructure investments, it's less than 5% of the total
03:51 number. And it's inching up in terms of Naira values, but in terms of percentages, it's still
03:56 a small margin. But then we are seeing a lot of engagement with the market in terms of other
04:01 infrastructure bonds, infrastructure funds. There are many players coming in to see how we can work
04:05 with the local, international, and the pension funds themselves are investing a lot more in some
04:11 of those real assets through the funds and through the bonds because we can't invest directly. So I
04:16 guess it's just to find the right structures, the right framework that enables us to do more of that.
04:20 Yes, talking about how attractive these are to also fund managers as well. If you could have
04:24 a whisper to the CBN governor at this point in time, the meeting will hold next week now,
04:29 what would that be? Well, I think the local community is happy with the increasing rates,
04:34 so more of that because yes, the yields are higher for fixed income security. So I think for that,
04:40 but also just the stability of the Naira on the one hand. But also I think thirdly,
04:45 for the window for local pension funds to be able to invest offshore, because that helps everyone,
04:50 the RSA holders, the economy diversification, I think that's a whisper to his ears.
04:54 Lastly, before I let you go now, also looking at mortgage plans as well now,
04:57 not the word isn't acceptance, but the utilisation of this window still remains largely muted.
05:06 Yes, it's largely muted and I think there's a pass through with the mortgage banks,
05:12 with the property developers and the pension funds.
05:14 And the housing costs are rising.
05:16 It's rising. I think for us, we're happy that the window is there and people are accessing it. It
05:20 will take time to grow as the ecosystem develops, but we're happy the window is there and encouraging
05:24 people to jump in and access that part of your RSA for mortgages.
05:30 Hopefully we'll have people to explore that option as they look to become homeowners.
05:34 Yes.
05:35 At this point in time, we'll leave the conversation here for now. Thank you so
05:37 much for talking to us today, Mr Agudah. That was Agudah, the Chief Executive Officer
05:42 of Pension Fund Operators Association of Nigeria.