Nigeria could hit $1 trillion economy through pensions’ long-term savings, reforms – Access ARM Pensions CEO

Nigeria has an ambitious target of becoming a trillion-dollar economy by 2030, a target President Bola Tinubu is unrelentingly pursuing. But pensions’ long-term savings and staying the course of the series of reforms embarked on in 2023 might just give the country a ticket to even surpass that aspiration.

In this interview with BusinessDay’s Eniola Olatunji and Wasiu Alli, Dave Uduanu, Managing Director and Chief Executive Officer of Access ARM Pensions highlighted ways the economy can be turned around using pensions’ long term-savings and key reforms as underpinnings. Dave also shared his thoughts on what investors think of Nigeria in the post-reforms era while reeling out how the firm has fared in the face of macroeconomic headwinds.

What’s behind the merger that created Access ARM Pensions, one of Nigeria’s top Pension Funds Administrator (PFA) by assets under management, and how does it fit into your ambition to be a leading PFA?

The merger was driven by ongoing shifts in the financial system, as banks transitioned into financial holding companies. Access Holdings followed this path, expanding into a diversified financial services group with subsidiaries across banking, credit, payments, insurance, and pensions. Under the leadership of the late Dr Herbert Wigwe, we developed a five-year strategic plan to position the pensions business as a dominant player in the industry. Remember that Access Bank has already evolved to become the largest bank in the country by balance sheet size.

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The goal has always been to be a market leader. As part of this plan, we assessed the financial services industry and recognized that beyond banking, pensions represented the next major growth opportunity. As Access Holdings had entered the pension industry late, our strategy to achieve scale was through mergers and acquisitions. This started with the acquisition of First Guarantee Pension Limited (FGPL) followed by a significant acquisition—Sigma Pensions—and the subsequent merger of Sigma and First Guarantee Pension Limited (FGPL) to create Access Pensions Limited.

The continuation of the plan to be a market leader led to what is the largest M&A transaction in the Nigeria Non-Banking Financial Services Industry; the merger of Access Pensions and ARM Pension Managers to create AccessARM Pensions Limited with a total assets under management (“AUM”) of N3.3trillion. The merger was a pivotal step in our five-year plan, set to conclude in 2027. As we look ahead, we anticipate solidifying our position as a top industry player, with market leading AUM in our current strategic cycle. However, our growth is not merely about scale—we are focused on delivering greater customer service and delivering competitive investment returns to our Customers.

By leveraging the group’s strengths in governance, operational efficiency, and technological innovation, we aim to provide superior investment returns and a broader range of diversified offerings. The merger combined ARM Pension Managers—a subsidiary of a leading asset management firm (“ARM Holdings”) with a strong presence in Lagos and the South-West—with the legacy Sigma Pensions, which had an extensive client base in the North and the Public Sector across the Country . This has created a well-diversified company with a truly national reach and scale required to meet the country’s financial inclusion ambitions.

Additionally, the integration brings together ARM Pension’s legacy of strong investment expertise with Access Bank’s extensive retail distribution network, along with the technological capabilities and talent from both organizations. This synergy positions us as a dominant force in Nigeria’s pension sector, ready to drive innovation and enhanced service delivery.

This strategic merger has been successfully executed, and we are pleased with the progress achieved. Since Access Holdings entered the Pension Funds Administration market , its assets under management have grown from about ₦330billion at the point of entry into the industry in 2021 to the current level of N3.3 trillion, marking a significant milestone in its industry growth journey.

Given the shift in the interest rate environment since 2020, how has Access ARM Pensions adapted its investment strategies to mitigate negative real returns and capitalize on higher yields? Can you provide specific examples of asset allocation adjustments?

To be clear, our investment philosophy is to provide our clients with sustainable long-term investment growth that delivers positive (inflation) adjusted returns. At the beginning of 2024, it became clear that the Central Bank’s monetary policy stance would be more hawkish; interest rates were expected to rise in response to two key factors: controlling inflation and, more importantly, stabilizing the currency against runaway depreciation against the major global currency – the US Dollar.

We saw the Monetary Policy Rates (“MPR”) increase from 18.5% to 27.5%, which significantly impacted yields on fixed-income instruments, particularly treasury bills. As fund managers, we strategically positioned our portfolio by increasing allocations to high-yielding fixed income instruments. However, it’s important to emphasize that pension funds differ from regular mutual funds, as they invest across different long-term investment and interest rate cycles over multiple years and multiple economic cycles.

While we have increased our allocation to fixed-income assets, the portfolio’s overall yield cannot immediately reflect current market rates because it includes instruments purchased over the last 10 years when rates were lower. Our goal is to ensure that, over a long-term period, our investment funds consistently deliver returns above long-run inflation in real terms.

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Additionally, we have increased our exposure to listed equities and alternative investment asset classes to enhance portfolio diversification and optimize risk-adjusted returns. The core of our investment strategy is to deliver competitive returns while maintaining capital preservation and sustainable growth for our contributors.

What role can insurance companies and pension funds like Access ARM Pensions play in driving the $1 trillion target of the government by 2030?

The role of pension funds in any economy is to provide long-term capital that drives infrastructure development, supports investments in real assets, and fosters the growth of businesses, including SMEs and large corporations.

Pension funds and insurance companies are major institutional investors, both playing a crucial role in providing the capital needed to achieve the vision of a $1 trillion economy. However, a key challenge in Nigeria has been that the financial market is primarily driven by commercial banks, which tend to focus on financing trade and short-term transactions rather than long-term development. This is because they lack the type of long-term funds required to finance sustainable economic growth.

For a long time, Nigeria did not have a deep pool of pension savings, which contributed to a sub-optimal and slower economic growth. If we effectively leverage the growing pension funds by investing in long-term assets such as infrastructure, housing, private equity, and SMEs, we can create the foundation needed for accelerated economic expansion.

In my view, reaching a $1 trillion economy is not an overly ambitious goal. If the economy were rebased today, we might already be halfway there. Using data from international financial institutions like the World Bank: on a Purchasing Power Parity (PPP) basis, Nigeria’s economy is already approaching the $500billion mark.

I don’t see the Federal Governments’ $1 trillion GDP target as unattainable. Given that Nigeria’s GDP was estimated at $362b by the end of 2023, the economy should be growing at a much faster rate, with a clear trajectory towards $1 trillion post rebasing by the end of the decade. The key enabler of this growth is long-term savings, particularly from pension and insurance funds, strategically invested in critical sectors like infrastructure, Power and Housing.

The government has introduced major reforms (eg- removal of subsidies on petroleum products, electricity and the foreign exchange market) aimed at opening up the economy, and recent reports suggest that Nigeria is becoming an increasingly attractive destination for investment. A combination of these bold reforms, along with the strategic deployment of pension funds into long-term assets, will be instrumental in achieving the $1 trillion economy vision.

What do you think of PFAs exposure to government securities and the industry opening up to alternative investments?

Historically, government securities have been the backbone of pension funds worldwide. In well-managed economies, governments leverage these funds to invest in infrastructure to drive economic growth.

As of 2024, approximately 60% of pension assets were allocated to government securities, down from 90% about ten year ago, indicating a gradual diversification of assets. Beyond equities and government securities, there has been a growing allocation to corporate bonds, commercial papers and alternative investments like Private Equity and Infrastructure.

Current regulations allow pension funds to allocate between 5% and 20% of their portfolio to various alternative investments, including infrastructure, private equity, and real estate. We see this as an opportunity to enhance investment returns, hedge against inflation, and contribute meaningfully to economic development of the country.

At Access ARM Pensions, we advocate a balanced investment approach. While government securities provide stability, we are gradually increasing our exposure to alternative assets and equities in line with regulatory guidelines. Our priority remains ensuring the security of the fund while driving sustainable growth for contributors.

Looking ahead, we anticipate that within the next two to three years, the share of government bonds in pension fund portfolios could decline to around 40%, as the equity market continues to shows promising growth and allocation to alternative assets ramps up.

How can Nigeria unlock the pension industry to invest in small and medium enterprises (SMEs) like Ghana has done with its ‘fund of funds’?

The Ghana Venture Capital Fund was established as a fund-of-funds to catalyze investment from Ghanaian pension funds into the private equity asset class.. This approach is particularly effective in smaller markets where numerous small fund managers operate, pension funds are relatively small, and direct investments can be challenging. By pooling resources, this structure enables more efficient capital allocation.

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In Nigeria, there have been proposals for a fund-of-funds model, particularly in the impact investing space However, I believe our pension industry have largely outgrown this model, as we are already making direct investments in private equity funds. The top Pension Funds in Nigeria hold at least N1trillion in assets under management and can build the internal investment expertise to invest directly in Private Equity Funds without going through a Fund of Funds.

At Access ARM Pensions, we have direct allocations to real estate investment funds, infrastructure funds, and private equity funds. This enables us to participate in larger-scale investments without necessarily needing a fund of funds structure.

However a case for using a fund of funds can be made to facilitate investments in SMEs, where capital requirements are relatively small. For instance, if a company seeks to raise $1 million, it may be too small for a direct pension fund investment. In such cases, a fund of funds could provide a more structured way to finance this requirement by investing indirectly through small SME Funds.

What is your view on SECs position concerning PFA investment in commercial papers?

In 2023, total commercial paper issuance reached ₦1 trillion. However, as interest rates rose, issuance declined, prompting pension funds to diversify their money market investments beyond traditional bank deposits.

While commercial papers provide an alternative investment avenue, their relatively light regulatory framework presents a potential systemic risk, particularly if issuers begin to default. Although commercial papers are not inherently problematic, stronger oversight is essential to safeguard market stability.

There is growing concern that we could revert to a period where entities with no productive use for funds issue commercial papers purely for speculative trading. Given that Pension Fund Administrators (PFAs) have fiduciary responsibilities—managing the retirement savings of over 10 million Nigerians—any loss in pension assets could have far-reaching economic consequences.

To address these risks, the Securities and Exchange Commission (SEC) have introduced stricter guidelines for commercial paper issuance, enhancing regulatory oversight. We fully support these measures, as ensuring all commercial papers fall under SEC regulation will strengthen financial system stability and improve the quality of issuers.

What policy changes would you recommend to improve the pension industry’s resilience in Nigeria?

The kind of reforms we need now should focus on expanding investment options available to Pension Funds. It is now time for Pension Fund Administrators to take advantage of these expanded opportunities to diversify their portfolios beyond government bonds and into areas like infrastructure; private equity and offshore investments. This will not only help enhance investment returns but also contribute to broader economic development.

One key consideration is the impact of currency depreciation on pension fund investment portfolios. Allowing pension funds to invest a portion of their assets in foreign securities could serve as a hedge against currency depreciation while improving overall returns. While this may be a difficult decision for policymakers, it is important to recognize that such an approach could enable the country increase its foreign income earnings in the form of dividends from Pension fund offshore portfolios, which strengthens the country’s foreign reserves in the long run.

Another area that deserves attention is investment in real assets. In places like South Africa, many of the high-rise grade A office buildings in cities such as Johannesburg and Cape Town are owned by pension funds and insurance companies. Nigeria can adopt a similar model by increasing allocating of pension fund investments into real estate, housing, and data centers. The growing demand for data infrastructure, particularly with the rise of AI and cloud computing, makes investing in data centers a particularly attractive sector for long-term investment.

At the same time, there is an opportunity to increase pension fund investments in listed equities. Compared to other markets, the level of exposure remains relatively low at about 10%; a gradual shift toward equities could enhance returns while supporting the broader economy.

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Beyond investments, there is also a need for improved financial literacy and more flexible retirement options. Expanding awareness about pensions, particularly for those in the informal sector, will bring more people into the formal financial system and strengthen long-term savings. At the same time, introducing more flexible withdrawal options will make pension products more appealing and relevant to a wider range of contributors.

Ultimately, a well-structured reform agenda that encourages asset diversification, strengthens protections against economic volatility, and expands investment into key sectors of the economy will play a significant role in shaping the future of the pension industry.

Data shows that less than 10 percent of Nigerians have a pension account whilst 98 percent of those in the informal sector are not saving for retirement. What steps can be taken to improve financial literacy and encourage more Nigerians to save?

One key solution is leveraging technology to make saving more accessible. By creating digital platforms that allow individuals to contribute through their smartphones, we can remove barriers and simplify the process. Incentivizing savings through tax breaks and other financial benefits can also encourage more participation. Additionally, sustained awareness campaigns are crucial to educating people on the importance of retirement planning. Many Nigerians are not saving simply because they do not fully understand the system or its benefits, so targeted financial literacy initiatives will play a vital role in driving change.

With a long history in mergers and acquisition, how have you successfully transitioned between these companies, especially holding leadership roles?

This has been a carefully orchestrated plan to build a leading Pension Fund Administrator in Nigeria. Years ago, while leading a much smaller firm, I developed the thesis that market leadership in the pension fund management industry would be driven by a strategy of roll-up mergers and acquisitions. My perspective was shaped by studying the evolution of the pension industry in Mexico, where, over 15 years, the number of pension fund administrators consolidated from 25 to just seven, with four companies emerging as dominant players with about 90% market share. This insight led me to develop a business plan built on a similar strategy in Nigeria.

I recognized early on that mergers are not a common place in Nigeria, as many companies are hesitant to business combinations. However, I developed the roll-up acquisition strategy and commenced execution by partnering with ACTIS Private Equity to achieve a management-buy in of Sigma Pensions Limited in 2016. Actis exited its interest in Sigma Pensions to Access Holdings. When Access Holdings acquired Sigma Pension, we revisited the plan and got approval from the Board to execute on the roll-up acquisition strategy. Access Holdings under the leadership of late Dr Herbert Wigwe had developed a very successful play-book for the acquisition of banks in Africa; so it was easy for them to see the same playbook being applied to the Pensions industry.

Subsequently; we analyzed the Nigerian Pensions market and identified five potential strategic partners. A successful merger is built on strong synergies and understanding whether the merging Companies complement each other in leadership, strategy, and operations. But more importantly, it’s about ensuring that the combined entity creates more value in a manner that 2 pls 2 is equal to 5 – so the value of the whole is greater than the sum of parts.

Through this process, we recognized that achieving our vision required top-tier talents, particularly in investment management, technology, operations and business development. One of the biggest challenges in any merger is integrating people and back-office operations. Our approach was clear: define a compelling vision, select the best talent from both companies, and ensure job security for all key employees. This commitment was central to our integration strategy.

Beyond the merger itself, our primary focus has always been built on leveraging our expanded platform to deliver superior customer service to our Clients. Everything we do is driven by customer satisfaction, service excellence, and staying ahead of the competition.

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Now that the major work is done, people often ask if we are planning another merger. Our focus at the moment is on organic growth, but we continuously evaluate opportunities. If a transaction aligns with our vision, we will consider it. Our goal remains clear, to be the clear market leader in the industry, and we will continue taking strategic steps to achieve that.

You have always echoed your ambition to lead Access ARM Pensions so it becomes a leader in the pension market. What are your long-term goals for the company and where do you see it in the next 5 to 10 years?

As I mentioned, our current five-year strategic plan runs until 2027, but our ambition extends far beyond that: we aim to be the clear market leader in the Industry. Our vision is to lead in leveraging technology to deliver exceptional service, as we see digital transformation as the future of pension fund administration. In the coming years, the PFA of the future will look very different from what exists today.

We also strive to be at the forefront of product innovation, particularly in the services we offer retirees. This goes beyond traditional pension reform and extends into the wider retirement planning and financial wellness. One of our key commitments to customers, depending on their current Retirement Savings Account (“RSA”) balances, is to support them in retiring with their own homes.

We are actively exploring solutions to address a critical question: How can we contribute to the reduction of the Country’s housing deficit by working with other Partners like DFIs, to finance the next five(“5’) million new homes in Nigeria through the capital market?. What is the value of a pension in an inflationary environment if a retiree has no secure home to retire to? Our goal is to facilitate access to economic housing for our customers and other Nigerian’s with a retirement savings account.

An example of such initiative is the establishment of the proposed housing finance fund (“MREIF”); to be managed by a domestic asset manager and regulated by the Securities and Exchange Commission (“SEC”). MREIF will provide access to affordable mortgages through licensed Primary Mortgage Banks and Commercial Banks in Nigeria. We are excited at the opportunity to partner with MREIF to provide housing finance to our Customers.

At AccessARM Pensions we are committed to playing a leading role in this initiative, ensuring that retirement planning in Nigeria extends beyond savings to true financial security.

Another key focus for us is financial inclusion. By collaborating with Access Bank, which serves over 60 million customers, we have a unique opportunity to drive financial inclusion at scale. This effort extends beyond Nigeria, leveraging Access Holdings’ presence in other markets. In some of these countries, pension reforms are already in place, while in others, we may need to play an advocacy role, encouraging governments to implement similar reforms.

Nigeria has a crucial role to play, given the success of its pension reform. In several markets we have visited, there is no formal regulated pension system—sometimes not even a Pension Regulator. We believe we can take the lead in shaping the future of pension systems across Africa, sharing insights and best practices to drive sustainable development.

For us, market leadership is not just about being the dominant player in the Nigeria Pension Market —it’s about setting the standard for the wider African Asset management industry. Our goal is to empower Africans to plan their financial future during their active economic years; secure their retirement, own their home, and maintain financial dignity in their retirement years. At the same time, we see our role as asset managers positioned to play a vital role in financing critical long-term infrastructure and nurturing the emergence of National Champions in critical sectors of the economy whilst contributing to the economic development of African Countries.

That is what market leadership means to us at AccessARM Pensions Limited.