(Reuters) – Nigeria’s pension industry is expected to triple its assets over the next three years to $70 billion, as the government targets small businesses to try to get more people into pension schemes, the industry regulator said on Wednesday.
Umaru Farouk Aminu, head of research at the National Pension Commission, said the commission was looking at how to attract more employees of small enterprises on to schemes.
He said 50 million people were employed in small businesses with up to four employees — everything from barber’s shops to small accountancy firms.
“We expect to triple (pension assets) in two or three years time … (by) targeting the (small business) sector,” Aminu told Reuters in a telephone interview.
The country’s pension assets have grown from about $10 billion in the last eight years, split between 4 million retirement savings accounts. Aminu said pension assets stood at $23.5 billion at the end of September.
He said contributions currently were mainly from half of Nigeria’s 12 million people working for the government or big companies but there were untapped opportunities in the much bigger small business sector. But there are some big challenges too.
“It is an unwieldy sector, sector has no regular income and its difficult to track with no statistics on these people,” Aminu said. Many do not have bank accounts.
He said half of Nigeria’s population of roughly 160 million were under the age of 20 years and so many were not of working age or unemployed.
The growth in pensions will also give a boost to fund flows into equities and bonds in the country and could also help improve liquidity on the stock market.
Regulations currently allow Nigerian fund managers to invest half of their portfolio in equities, 35 percent in the money market and the rest in government bonds.
The increase in pension assets should ease liquidity problems that have dogged one of Africa’s biggest stock markets since the financial crisis in late 2008, analysts say.
Large foreign funds tend to stay away because daily turnover in individual stocks rarely exceeds more than $1 million, too small for many funds.
The stock exchange’s main index, which ended 2009 around 70 percent below its peak, has risen more than 39 percent this year compared to a decline of 4 percent in its emerging market peers.
[Reuters]