Yemisi Izuora
The Nigerian Stock Exchange (NSE) has commenced the creation of NSE Pension 40 Index as part of key initiatives to drive market optimisation. The NSE Pension Index conforms with the requirements of the Pension industry as specified in the Pension Reform Act 2014 (as amended) and Regulation on Investment of Pension Fund Assets as prepared and amended by the National Pension Commission.
According to a statement from the exchange, the new index will provide a tracking mechanism for PFAs, CPFA, Fund Managers and others that Invest in accordance with the PENCOM guidelines. It can also act as a benchmark for measuring performance and reporting performance to Retirement Savings Account (RSA) holders.
The Executive Director, Business Development, NSE, Mr. Haruna Jalo-Waziri while commenting on the index said that “Investors want a diversified way of measuring market movements which has a wider coverage of companies as is the global practices. The NSE Pension Index will provide investors with additional tool to make the most of Nigeria’s market. It will also encourage the development of other products such as Exchange Traded Products (ETP’s) and Index Futures in the Exchange”.
He also added that the NSE Pension Index will have the top 40 companies based on market capitalisation and liquidity. In addition, companies to be included must have Free Float Factor of at least five percent. The NSE Pension Index is a Total Return Index. Consequently, normal dividend payments will be reinvested and accounted for in the Total Return Index by a Divisor Adjustment.
Furthermore he said that, special dividends from non-operating income require index divisor adjustments to prevent the distributions from distorting the index (same with price index). The NSE Pension Index constituents would be reviewed, re-balanced, re-weighted and changed once in a year on the first business day in January whereby constituents are changed (added or deleted) based on their market capitalization, liquidity in the previous twelve months and Free Float Factor.
The Nigerian bourse began publishing The NSE 30 Index in February 2009 with index values available from January 1, 2007. On July 1, 2008, the NSE developed four sectoral indices with a base value of 1,000 points, designed to provide investable benchmarks to capture the performance of specific sectors. The sectoral indices comprise the top 10 most capitalized and liquid companies in the Banking, Insurance and Food/Beverage & Tobacco (now Consumer Goods) sectors and the top five most capitalized and liquid companies in the Oil & Gas (Petroleum Marketing) sector.