Will Nigeria’s pension industry sustain growth drive?

Nigeria's pension industry has witnessed remarkable growth, with total pension assets soaring to a new high of 22.5 trillion naira in 2024, representing a 22.7 per cent increase. Dave Uduanu, the Managing Director at Access ARM Pensions, shed light on the industry's growth trajectory, strategies to enhance coverage, and plans for recapitalization in a recent interview. Uduanu attributed the industry's robust expansion in 2024 to various factors. These included substantial contributions from both the public and private sectors, favorable returns in the stock market reaching 38 per cent, elevated yields in the fixed income markets, and asset revaluation due to currency depreciation. Notably, closed pension funds experienced the most significant growth at 38 per cent, followed by existing schemes. Looking ahead to 2025, Uduanu expressed optimism, citing sustained high interest rates, a promising stock market performance, and increased contributions from the private sector as key drivers for continued growth. The industry remains buoyant, with expectations of further expansion in the coming year. The conversation then delved into the broader market dynamics and their potential impact on pension investments. Uduanu anticipated a reduction in inflation below the 20 per cent mark due to base effects, although factors like currency stability, food prices, and government spending could influence this trajectory. Despite this, he foresees bond yields remaining elevated, driven by the central bank's cautious monetary policy. As the industry moves towards recapitalization, consolidation emerges as a significant theme, given that the top ten players currently control 95% of the market, with the top two alone commanding nearly 45%. Uduanu outlined that consolidation may be accelerated by recapitalization and the advantages larger players enjoy, such as economies of scale and enhanced operational efficiency. The interview also touched on the pivotal role of partnerships and financing opportunities in facilitating industry growth. Uduanu emphasized the need for asset management to leverage pension funds for financing major infrastructure projects. Initiatives like the Mortgage Refinance Investment Fund (MRIF), a public-private partnership aimed at providing low-cost mortgage financing to boost the housing sector, exemplify collaboration between the pension industry and government entities. Uduanu underscored the critical role pension funds can play in driving economic growth through strategic investments in key sectors like infrastructure and renewable energy. He stressed the importance of instilling investor confidence and transforming pension funds into active market participants to maximize their impact on Nigeria's economy. In conclusion, Uduanu highlighted the evolving landscape of pension fund investment, emphasizing the shift towards equity investments as the next phase of growth. With a focus on skilled investment management, pension funds are poised to become vital contributors to Nigeria's economic development. As the industry looks towards a future marked by sustainable growth and catalytic impact, the foundation appears set for Nigeria's pension sector to emerge as a key driver of economic progress.