A finance expert has advised operators in the insurance and pension sector to consider significant investment in the capital market.
Chairman, Issuing Houses of Nigeria, Mr. Victor Ogiemwonyi who gave the advice while speaking at a finance forum in Lagos said both operators of insurance industry and pension sub-sector have a lot of long-term funds at their disposal and which will yield bountiful return for them.
He noted that the funds, if invested in capital market, will yield good returns in the near future, as well as lead to market rebound.
Ogiemwonyi, said it is high time the duo should take advantage of low price of shares to increase their stake in the market, which would increase the capitalisation of the market.
This, according to him, will allow the capital market to finance huge infrastructural deficit which has become the bane of Nigeria’s economic development.
According to him,the N4.5 trillion pension assets will help to fix infrastructural challenges in the country if invested through the capital market.
He noted that as the bearish trend continues in the market, this is the right time for institutional investors, like insurers and PFAs to take stake in the market adding that the prevailing bad time facing the market will not last long.
“This is the best time for institutional investors, such as insurance companies and PFAs to invest in the market because the bad time will soon be over and the prices of stocks will appreciate over time. By then, those who have taken opportunity of this price-fall will reap the benefit,” the issuing house boss advised.
He pointed out that PFAs are known to be in possession of long-term fund adding that these are monies that the owners might not take in the next 10 to 20 years.
“If such monies are invested in the market, the value will have appreciated a lot by the time the contributors might need it.”
According to him, currently, the PFAs are investing about 11 to 12 per cent of their pension assets in the capital market, whereas the law allows them to invest up to 22 per cent of their fund in listed stocks.
He urged them to increase their stake, promising a huge positive return on their investment in the near future.
Apart from good return on investment, he noted that these funds must have indirectly affected the building of infrastructures, such as roads, rail system, electricity, water system, among others, through the capital market
Also speaking, President, Chartered Institute of Stockbrokers of Nigeria (CIS), Albert Egbaroghene Okumagba urged large local institutions with strong capacity to invest in the capital market to reduce dependence on foreign investors and prevent the market and the economy from unnecessary shocks.
“We particularly implore the Pension Fund Administrators (PFAs) to lead the vanguard of this investment opportunity by increasing their stakes in the equity market.”
‘’If the capital market develops, it could be used to finance the huge infrastructural deficit of the country. We believe that the effective and efficient utilisation of the capital market facilities would enable the Federal Government finance the 2015 budget despite its frightening infrastructural deficit’’, he stated.
Meanwhile, the President, Association of Stock broking Houses of Nigeria (ASHON), Mr. Emeka Madubuike, while explaining the need for low price of listed insurance stocks said, most of the insurance companies are not well capitalised.
According to him, insurance industry needs another round of recapitalisation to build enough credibility.
He noted that i developed countries, insurance firms own banks, but that the reverse is the case in Nigeria.
He observed that most insurance firms are not well capitalised to make the desired impacts therefore need mergers and acquisition.
Some of them (insurance companies) need mergers, while some need to be acquired. So, insurance industry still needs consolidation and if this happens, they (insurance firms) will contribute more to the capital market growth,” he suggested.