Nigerian banks are increasing their acquisition of pension firms to expand from banking to the provision of wealth management and other services, thus taping the large assets of about N15 trillion, currently under the management of Nigeria’s pension industry.
This was disclosed by Razaq Ahmed, the co-founder and CEO of fintech startup Cowrywise, who spoke during Nairametrics’ Corporate Deals book webinar on Saturday.
He noted that with the growth of the industry, assets under management are expected to rise to N20 trillion by the end of the year.
Reason for the acquisition: He added that the wave of acquisitions we saw last year points to the strategic intents of the banks. Citing the acquisition of sigma pensions by Access Holdings, he added:
- “We also had one handled by GTB, which is the acquisition of Investment 1 pensions, which were formerly subsidiaries of GTB.
- “If you look at these 2 major transactions, they point to the fact that Banks are trying to build Financial conglomerates, they are trying to expand from banking to provision of wealth management services, including zenith bank which would incorporate a Holding Company structure.
- “It makes strategic sense, Banking is second to telecoms in Nigeria in terms of the user base, at least, we can say the banking sector has about 50 million unique users, which gives them 50 million users to sell products, which is outside the millions of unbanked, so there is a huge opportunity to offer services.”
Prospects of the pension industry: Razaq also spoke about the prospects of the pension industry, noting that the pension industry is unique especially in Nigeria, seeing how it has evolved since the contributory pension scheme started in the early 2000s.
- “In terms of structure, the industry is concentrated with about 22 players, and the leading industry player controls 37% of assets under management, which is huge, and the second player comes under 7-8%. So, that speaks to the first m&A, which is Access Holdings’ acquisition of sigma pensions, it might be a race to be the second largest player,
- “We might begin to see more of that, with GTB acquiring Investment One, I see that as a launch pad to the pension industry,
- “Growth prospect, evolution has been very interesting and now assets under management of N15 trillion, which is huge by any standard, the industry might hit N20 trillion by 2023, and 10 million users.”
He also added that what needs to be considered is the fact part of the growth comes from periodic contributions and returns from the pension industry, adding that at 10 million users “ it shows potential growth, but that might not come easy, because you might need formal jobs” he said.
- “So that will be a function of how much economic growth we are experiencing, as we have not had much growth pool. If the economy is booming, and formal jobs are created, I won’t be surprised if the industry assets hit $20 trillion by the end of the year.”
What you should know: Nairametrics captured 320 corporate deals in 2022, from 177 in 2021, by 35.8% lower in value, as startups accounted for total volume, most of it in the form of seed funding, about $1.08 billion.