By David Akinmola
As the Federal Government consolidates the economy towards $1 trillion economic projection by 2030, stakeholders in the pension industry have called on long-term and institutional investors to take a more active role in financing sectors critical to Nigeria’s industrialisation and economic growth.
Speaking at the 9th Nigerian Association of Insurance and Pension Editors (NAIPE) conference in Lagos, the Chief Investment Officer of Access ARM Pensions, Wale Okunrinboye, said that there is a need for pension funds, insurance companies, and other key financial stakeholders to collaborate with the government to achieve Nigeria’s ambitious goal of becoming a $1 trillion economy.
He emphasised that countries transitioning from underdeveloped to developed economies typically undergo a robust phase of industrialisation, followed by the growth of high-service sectors. However, Nigeria, like many Sub-Saharan African nations, has largely bypassed the industrialisation phase, relying heavily on the services sector. This gap, he noted, poses a significant challenge in job creation and fostering sustainable economic growth.
Okunrinboye stressed that attracting both local and foreign investments is essential for Nigeria to become a fully industrialized economy. He urged pension funds and other long-term investors, traditionally focused on government securities, to diversify their portfolios into critical sectors that can drive industrialization.
“To transition into a fully industrial economy, we need to attract investments—some of which should be local, and some foreign. This is where pension funds and other long-term investors come in. A large portion of pension fund investments is currently in government securities, but recent discussions have focused on the need to invest beyond government securities as a way to catalyze and develop the economy,” Okunrinboye said.
He continued: “For long-term investments, pension funds, insurance companies, and the broader financial system, it’s time to engage the economy, collaborate with the government, and work with stakeholders to develop financing arrangements that support critical projects. These projects should help Nigeria achieve industrialization and boost exports.”
“For institutional investors, now is the time to find ways to directly engage with the economy. We must invest in projects that drive industrialization and are export focused. By doing so, we will generate revenue, enhance exports, create jobs, and increase tax revenues, ultimately propelling Nigeria towards the $1 trillion economy target set by the government.”
Okunrinboye further highlighted that Nigeria’s large but underutilized labor force represents its greatest resource. “Our workforce is semi-skilled due to limited education. Typically, such a labor force is absorbed by industrial sectors. But without fully passing through the industrial phase, we aren’t creating the jobs necessary for widespread economic development,” he explained.
Also speaking the Managing Director/Chief Economist, Analysts Data Services and Resources Limited, Dr. Afolabi Olowookere, advised the Federal Government to tinker with the current policies and speed up infrastructure development to encourage more investments, if it must realise the $1 trillion economy projection.
According to Olowookere, the country’s Gross Domestic Product grew from 2.98 per cent in the first quarter of the year to 3.19 per cent in the second quarter, noting that the forecasts in the short to medium term remained weak.
He said inflation and other socio-economic manifestations, such as interest rates could constitute obstacles to achieving the projection.
According to him, “inflation rate rose from 21.82 per cent in January 2023 to 34.19 per cent in June 2024 and declined slightly to 33.40 per cent in July 2024 and further to 32.15 per cent in August 2024.
“Inflation reached 32.15 per cent (YoY) in August 2024, driven mainly by food price inflation and loose financial conditions.
“With continued monetary tightening, IMF projects inflation would gradually decline to 24 per cent (YoY) at the end of 2024 and further to 14 per cent by 2027.
“Hence, the interest rate is expected to remain relatively high in response to inflation and economic instability.
“Naira has depreciated by 71.15 per cent between January 2023 and August 2024, rising from N461/US$l to NI,598.1/US$, now around NI,650/US$. Naira will likely continue to face gradual depreciation pressures due to trade imbalances and inflation,” he said.
He emphasised that managing the economy under the current economic setting would, at best, grow the economy to around $450 billion by the projected 2030 date.
Reflecting on the current GDP position, the financial analyst identified the leading contributors to Nigerian outputs to include Agriculture, ICT, Trade, and Manufacturing.
Olowookere noted that the financial and insurance sectors account for 6.579 per cent of Nigeria’s GDP, but continue as the major driver of economic growth.
He said: “It has remained the fastest growing sector in recent time. The performance of the Nigerian economy has been mixed in the last year.
“The performance of the financial sector and fiscal space has been largely positive. But changes in the real sector of the economy have not been impressive.
On the Nigerian insurance sector’s outlook and contribution to the GDP, Olowookere mentioned that the total assets in Nigeria’s insurance industry grew by 36.9 per cent in Q1 2024 from N2.4 trillion in Q1 2023 to N3.3 trillion.
“Non-life businesses accounted for NI.94 trillion while life businesses contributed NI.39 trillion. NAICOM sees the market as sound, stable, and profitable with a positive outlook.
“The insurance uptake remains stagnant and critically low as only 3.1 per cent of adults (3.4 million) were reportedly covered by a regulated insurance policy, according to EFInA 2023 report.
“The sector’s total value added in 2023 was N687.3 billion. Its contribution to GDP is less than 0.6 per cent. Its growth rate fluctuates over time, recording 13.3 per cent in Q2’24, far higher than 3.19 recorded for the entire economy.”
The financial analyst also hinted at the emerging trend in the sector about digital transformation, adding that the adoption of digital technologies was revolutionising the way insurance products are marketed, sold, and serviced.
According to him, from online policy purchases to mobile claims processing, insurers are leveraging technology to enhance the customer experience and streamline operations.
“Insurtech companies are revolutionising the traditional insurance industry by introducing new products, streamlining processes, and reaching untapped market segments, enhancing efficiency and customer engagement. “Insurers are utilising data analytics to provide personalised products and services, enhancing customer experience and loyalty through improved communication channels like chatbots and social media engagement,” he added.
Earlier in his goodwill message, the Chairman of the occasion, and a former Commissioner for Insurance, Fola Daniel, commended NAIPE for putting the programme together.
He said: “As we gather here today, we stand at a pivotal moment in our industry, one that calls for reflection, innovation, and collaboration.
“Over the past decade, NAIPE has grown from a nascent idea into a formidable platform that champions a vital role in the insurance and pension sectors.
“Our mission has always been clear: to enhance the quality of information disseminated to the public and to foster a deeper understanding of the complexities within our industries.
“Today, we are privileged to have with us a diverse array of speakers, thought leaders, and industry experts who will share their insights on the evolving landscape of insurance and pensions.
“The themes we will explore in the conference, are not just timely but essential as we navigate the challenges and opportunities.”
