‘Nigerian pension industry is fragmented, and needs consolidation’

Dave Uduanu is a well known name in the Nigerian pension industry having served as CEO in one of the top rated Pension Fund Administrators (PFAs) as well as chairman Pension Fund Operators Association of Nigeria (PenOp). Uduanu who was recently appointed the managing director/CEO, Sigma Pensions limited after its acquisition by Actis, a global private equity fund, in this interview with Modestus Anaesoronye shares his vision for the company, growth strategies and future of the pension industry. Excerpt:

You were recently appointed the managing director/CEO of Sigma Pensions Limited; tell us your vision for the establishment?

I joined Sigma Pensions Limited six months ago. Our vision is to become the second largest PFA in Nigeria. We are currently number five by asset under management (AUM), and we are working with our majority shareholder Actis to present a strategy that is built on consolidation of the industry, organic growth using some of the initiatives of PenCom to significantly increase our AUM from just over N300 billion to more than N600 billion over a planned period of five years.

We know that Actis recently acquired majority shares in Sigma Pensions, what does this mean for the PFA and the industry as a whole?

Well, I will start from industry. I think it says that the pension industry is very attractive. The Actis investment is the second investment by private equity fund in the industry, the first was Helios that invested in ARM Pension Mangers. But Actis is more significant because it is the largest emerging market private equity fund. So, it has really beamed a search light of investors on the Nigeria pension industry and Nigeria as an investment destination. It also says that Sigma Pensions corporate governance standard is world class, right investment in technology platform as well as good distribution network to attract a company like Actis. As you know, Sigma was recently profiled as one of the companies to inspire growth in Africa. They were 343 companies and only 69 of them from financial services sector and 57 from Nigeria and Sigma is one of them. It means that Sigma is migrating from a company that is domestic in outlook to a company that is international and intentioned to building world class corporate governance standard and attracts top management professionals to take the company to higher level. What it means for the country is that, at a time like this when foreign exchange is scarce, ACTIS made investment and actually brought in money into the country, and this further reassures other investors who are indecisive about coming into Nigeria now, that, here is a place to come.

You said your target is to be number two in the next five years, could you tell us what your growth strategies are?

I will just outline the growth strategies. I have already started talking about consolidation. There are 21 registered PFAs in Nigeria and for us a company and from the position of our core investor, Actis, the industry is highly fragmented. So Actis believes that the industry is ripe for consolidation that is one of our strategies.

Our second strategy is the role out of the micro pension scheme. There are seven million registered contributors and I think there is the potential to reach 20 million according to industry strategic plan. So, we are coming up with some strategies, which I am not going to divulge here that will allow us capitalize on these opportunities. The third strategy is selection of high net worth individuals and we are looking at offering some value added services to this class of individuals. And the last strategy which we have started doing, is to move Sigma Pensions away from being a company that is focused on public sector to one that will be a growth engine in the private sector. In that case, we are going to invest significantly in technology, products. We are going to refresh the brand to be able to attract the new millennia’s. We are also investing in the social media and also partnering with the media to project the image of the company. 

One big issue in the pension industry today is the opening of ‘transfer window’. If that happens today, how prepared is Sigma Pensions?

I will say that the industry as a whole is at varying degrees of preparedness and we are waiting for guidelines from our regulators. In terms of how prepared Sigma Pensions is, like any other PFA, while we await the guidelines, we are putting in place structures to drive the process. It will interest you to know that of the 650,000 contributors in our list, 250,000 are from the informal sector. Sigma is prepared and we have invested in the right technology and our platform can take up to two million contributors; we are in all the states of the federation; we are investing in mobile platforms to allow micro pension contributors to access our services. We are also ready to launch a new fund for the micro pension scheme, which allows for flexibility in terms of withdrawal. We are prepared at Sigma Pensions.

If the ‘Transfer Window’ happens, why will customers want to remain with you?

I think the first thing that will drive the decision of whether a customer will want to stay or leave a particular PFA is risk and safety of his investment. Sigma had made a lot of investment in technology, customer service and based on that our customers are well abreast of their investment with us, because we have created an enabling platform where customers can interact and are updated on regular basis. Sigma is risks focused institution and have been rated highly by different institutions. Another reason is the reach of our business because we are present in all the states of the federation. You can reach us on mobile, call center, social media or on any of our customer service points across the federation. The third point is on the quality of our shareholders. Sigma was founded by indigenous entrepreneurs who have built the company in the past 10-years and with Actis entering, you are dealing with a company that is with the right board, international in practice and aboard that have international experience and reputation. Actis is regulated by the Financial Conduct Bureau in London.

Sigma Pensions was recently profiled by the London Stock Exchange as one of the companies to inspire Africa, what does that mean for the company?

You know that London Stock Exchange is a market that attracts a lot of investment from different continents of the world. So what they did was to look for companies that are international investors and are growing fast and will have the  potential to list at the London Stock Exchange and Actis is one the emerging market funds. What they did was to profile these companies and so they settled for Sigma. They looked at companies that are growing at a rate of at least 20 percent over the past 20 years, companies that appeals to the mass market. They found out that in Sigma we have over 600 accounts and a company that is attractive to international investors, given that Actis just invested in the company. I think that is some of the criteria they used. A lot of the companies are in the consumer services sector, some are in financial services including banking and insurance, and Sigma is the only the PFA listed from Nigeria. And this gives credence to the fact that the London Stock Exchange working with PwC and African Development Bank believe that we have corporate governance structure that makes us attractive to international investors. At Sigma, we have a policy that is called anti-bribery and tipping policy that prohibit us giving money to secure business and that is the first of its kind in the industry. It is something we have just finalized with our board and it is something we are going to regularize through the press, and with the industry to ensure that very high ethical practice is in place in the industry and that Nigerian companies operate by international standard.

PenCom recently released the amended investment guideline, what does that guideline mean for the industry and for the contributors.

The guideline is quite radical. The first thing it does is that it allows investment of pension fund into holding companies that a listed on the stock exchange, for example companies like Stanbic and FBN Holdings. So, you can see that the market has rallied a bit. The second point is that it allows investment on sharia compliant instrument like Sukuk or other Islamic finance products which opens up that segment of the market. But what is perhaps the most radical change is the introduction of multi fund, which means that retirees and contributors can select instruments based on their risk appetite, profile and their age and outlook in investment. With this fund we believe that the market will open up. There is provision for minimum investment in equities and alternative asset classes. I think the guideline will unleash investment in alternative asset classs to support infrastructure financing particularly housing. It will also support investment in the stock market because of the minimum investment in equities. Also the allocation to equities has been increased from 25 percent to 65 percent in Fund One. So now, members have the choice to stay in their PFAs and choose different funds as it where. This is where the market has gone in other markets, like Mezico, Chile and the US. Member choice is fundamental and member choices within companies are very important because that enables you to get a menu of fund types depending on the determining factors.