The Managing Director and Chief Executive Officer of Sigma Pension, Mr. Dave Uduanu, has identified the lack of willingness by companies to be transparent as a major factor inhibiting access to the huge pension fund.
Uduanu made this disclosure at the maiden expert roundtable put together by Sigma Pensions to discuss the key issues within the investment space in Nigeria between pension fund managers and private equities.
The roundtable is expected to deliberate on how more pension funds could be invested in private equity, SMEs and growing companies.
“The main thing holding back corporate bonds in Nigeria is corporate governance. A lot of the companies are not interested in opening their books to investors to scrutinize and until we address the issue of corporate governance transparency we would not see the instruments that will create diversification opportunities for pension funds.”
“The potential in agriculture is about $60 billion opportunity. However, it is not something that pension managers can do by themselves as investors. We see significant opportunities in the sector. One or two of the listed companies are some of the best performers in the market. You would be surprised with what companies like Olam is doing in the north. There is a huge amount of investment going into agriculture.”
Uduanu said that it is down to governance to formalize the agriculture sector, adding that a lot of practitioners in this space are informal, and that they were not willing to open their books.
“It is just that they are not transparent. The governance standards are not that high and we would like to see some of those listed on the stock market and then they can open their books to investors.
“There had been calls for increased investment in private equity which we think is quite germane because the banking sector is starved of capital, they are not lending anymore and the other sources of capital are pension funds and insurance companies. But according to our regulations, the only way we can invest in the real sector is through private equity fund.”
Like Uduanu, economist, Dr. Doyin Salami, also argued that the key issue with diversification is unavailability of investment instrument.
“We can diversify the portfolio by investing in other businesses, but we don’t have the infrastructure is not investible. When we say it is not investible, it means we don’t have instruments through which we can invest in infrastructure, get a good return and get the money back.
“So, the real question with the PFA is that how do you create diversification in a market where the capital market is shallow? The only person borrowing is the government, the companies are afraid of coming to us to borrow because our standards are high, much higher than the banks”, Salami said.
The roundtable also highlighted the macro risks that the country is facing as a build up to the general election in spite of high oil prices.
The participant noted that the primary challenge is the country has a four year electoral cycle which runs very quickly.
“Investors are sitting on the sidelines, once they know who the main contenders are, people will make their bets. I don’t think they will wait till after the elections, they want to see more clarity on the political process; who is going to be the candidate of the opposition party,” they noted.