Nigeria’s pension industry will see increased competition in service delivery and returns on investment after the ongoing recapitalisation of the sector with new investors taking position.
Industry analysts are anticipating more mergers and acquisitions, likely to intensify in the first quarter of 2022, when the recapitalisation exercise started in April 2021 would be ending.
At the last count, a new investor, Tangerine Group, has come into the sector, merging with APT Pensions, having acquired AXA Mansard Pensions earlier, while GTB Holdings has acquired Investment One Pensions, and FCMB has acquired AIICO Pensions, confirms Ehimeme Ohioma, head of surveillance at the National Pension Commission (PenCom).
This is as 11 Pension Fund Administrators (PFAs), out of the 22 registered operators, are said to have met the capital requirement ahead of next year’s recapitalisation deadline.
Ohioma, commenting on the ongoing recapitalisation exercise, says the ongoing capital phase in the industry has attracted new investors, which no doubt will make the sector highly competitive.
According to Ohioma, the success of the exercise will climax before the deadline in the first quarter next year, as more mergers and acquisitions are expected.
He notes that the present capital raise approved by the PenCom board in April 2021 is the third of such since the coming on board of the Contributory Pension Scheme through the Pension Reform Act 2004.
The first, according to him, was the N150 million capital base in the repealed Pension Reform Act 2004, followed by the second recapitalisation to N1 billion in 2011, and now, the third from N1 billion to N5 billion now.
Ohioma states that the objective of the recapitalisation is to improve the financial stability and operational efficiency in the industry, noting that the directive was right, as it could not have come at a better time than now after the last exercise in 2011.
It is obvious that the industry has grown in assets and contributions have increased, so there is a need for increased working capital.
The new capital will help retain the skilled workers, he says, saying, “We need to attract talent. There is a need for digitalisation and ensuring efficiency, especially with the COVID-19.
“On or before February 2022, we expect a picture of what the industry is going to look like before the April deadline.”
According to PenCom’s first quarter 2021 report, approval has been given for the acquisition of AXA Mansard Pensions Limited by Eustacia Limited and the change of name from AXA Mansard Pensions Limited to Tangerine Pensions Limited.
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In addition, the Commission granted “No Objection” for the merger between Tangerine Pensions Limited and APT Pension Funds Managers Limited, while FCMB Pensions Limited, one of the subsidiaries of the First City Monument Bank Group plc, also acquired a 60 percent stake in AIICO Pension Managers Limited.
PenCom had on April 27, 2021, mandated PFAs operating in the country to increase their Minimum Regulatory Capital (shareholders’ fund) requirements to N5 billion from N1 billion, giving them 12 months to complete the exercise.
As of September 30, 2021, total pension assets under management rose to N13.001 trillion from N12.901 trillion at the end of August 2021, while registered contributors increased to 9.461 million in September.
The industry has grown at an impressive CAGR of 18 percent over the last five years, culminating in an asset base of N12.3 trillion, equal to $29.9 billion as December 31, 2020.
This is according to the African Private Equity and Venture Capital Association (AVCA) and the Pension Fund Operators Association of Nigeria (PenOp) first ever report on Nigerian Pension funds engagement with private equity released recently, which incorporated responses from Nigeria’s leading pension fund managers.
Aisha Dahir-Umar, director-general, PenCom, says the maintenance of a consistent growth trajectory continues to justify the Commission’s overriding investment philosophy of ensuring the safety of pension fund assets.
