Venture capitalist Samuel Frank wants 5% of Nigeria’s ₦31.48 trillion Pension Fund to go to startups

Nigeria’s pension fund administrators are quietly starving the demographic engine required to keep their own systems solvent. By retreating into the perceived safety of government debt, institutional capital is turning its back on the high-growth technology sector that employs the very generation expected to fund future liabilities.

Nigeria’s pension pot currently sits at over ₦31.48 trillion. However, the macroeconomic climate has engineered a severe yield trap. Samuel Frank Chigozirim of Sahara Impact Ventures argues that this exact dynamic is the primary barrier preventing capital from flowing into the innovation economy.

“I think one thing that is blocking them is due to the current attractiveness of government borrowing,” Frank explains. “If they are getting 14, 15, or 16% in a year from a government-backed security, they would rather just do that and be sure because this is pension and these are people’s retirement plans. So rather bank on that safety than explore the risk.”

While the Pension Reform Act of 2014 legally permits private equity exposure, it fails to enforce it. The National Pension Commission (PenCom) instituted a maximum cap on venture capital allocation but did not mandate a minimum deployment. Frank highlights this as a structural policy failure, especially when compared to infrastructure funding.

“There is a cap, but there is no floor, and I think that’s the problem,” Frank states. “We see this especially in the case where they have been mandated to invest in infrastructure. You see a lot of infrastructure funds raising money from the PFAs because there is a mandate to deploy at least 5%.”

Bridging the early-stage pipeline with a $1 billion math

To break this cycle of stagnation, policymakers and ecosystem leaders are debating the mechanics of redirecting a mandatory 5% of pension assets toward startup investments. According to Frank, the scale of this domestic capital injection would fundamentally rewrite the Nigerian venture ecosystem.

“Now, 1.5 trillion at a very basic conversion rate of 1,500 comes to about $1 billion in extra funding,” Frank calculates. To put this into perspective against foreign direct investment flows, he notes that total funding for African venture capital in 2025 reached roughly $3 billion, while Nigeria captured $343 million. “So 1 billion alone is about 3 times that number. Three times what came in in one year alone is what can be unlocked.”

This capital is not meant to bloat late-stage valuations. Instead, Frank argues it deliberately targets a critical market failure by funding pre-seed and seed-stage companies.

“One of the biggest gaps that we’ve seen with regards to VC funding or the VC ecosystem in general in Africa is that there is a widening gap of businesses that are not funded at the pre-seed and seed stage levels,” Frank notes. “For people who write larger cheques, Series A and Series B, they are struggling to find businesses they can back because there is no adequate pipeline for them.”

The economic modelling supporting this 5% allocation relies on staggering macroeconomic multipliers. Frank’s thesis breaks down the $1 billion injection over a disciplined ten-year timeline.

“If you pull out $1 billion and spread this over 10 years, that is $100 million,” Frank explains. “If it’s allocated to 1,000 businesses, that is $100,000 per business, fitting perfectly into the pre-seed and seed stage levels.”

The immediate byproduct of this model is aggressive job creation. According to Frank, an average startup today has seven to ten core team members. “This gives you 7,000 to 10,000 employees, which can grow two times within a year. In 10 years you are looking at 140,000 to 200,000 jobs being created,” he models. “If you multiply this by the average family size of, like, six people, you’re looking at about 1.2 million people being impacted by just PFAs bringing out 5%.”

The GDP contribution is equally compelling. Frank maps out a deeply conservative baseline in which the funded businesses generate only $50,000 in annual revenue, representing a 50% discount relative to their initial funding. “For 1,000 businesses making $50,000 in annual revenue, that is $50 million in added GDP,” Frank calculates, projecting that over ten years, “this comes to about $2.75 billion”. This entirely excludes the upside of potential unicorns. “To become a business valued over $1 billion, you technically have to be doing at least $100 to $200 million in annual recurring revenue. But we are just looking at businesses that will just keep doing only $50,000 in a year.”

Yet, Frank’s most pressing argument centres on self-preservation for the pension administrators. A rapidly ageing contributor base threatens to shrink total assets under management. “We are seeing young Nigerians actively not even contributing to pensions because they already earn money from social media,” he warns. “People who are on TikTok or making money from Facebook, from Instagram, from being influencers – they are not thinking about pensions. So there is already a large pot of cash that the PFAs are currently losing out on.”

“The greatest liability currently facing the pension industry is inaction,” Frank asserts. He projects that if the 10,000 funded businesses contribute a minimum of $2,000 each per year on behalf of their employees, it would inject $20 million annually into the system. “In 10 years, that is 3 trillion Naira added to the AUM they have. This is regardless of the 1.5 trillion that they’ve already put in.”

De-risking foreign capital and currency insulation

African technology ecosystems remain dangerously reliant on foreign venture capital, which brings strict dollar-denominated mandates. Frank points out that local pension liquidity introduces essential market-contextual patience.

“With local capital there is more patience because there is that contextual understanding of the market,” he argues. The macroeconomic turbulence between 2021 and 2024 illustrates this perfectly. “If a business got $1 million in 2021, around 300 million Naira, by 2024, when the exchange rate went all the way up to 1,500, for the business to still record the same dollar metrics of revenue, the business has to make five times as much,” Frank details. “Under foreign mandates, that business has not grown, but if that were local currency, that business would have performed excellently well.”

Domestic funding also radically shifts power dynamics in favour of local founders. “You are having local people form part of your boards,” Frank notes, eliminating the friction of explaining domestic economic shifts to foreign board members. Furthermore, it simplifies founder cap tables and legal structures. “It’s easy for you to have your HoldCo and OpCo here in Nigeria rather than trying to operate a Delaware entity or a Mauritius entity or a UK entity and stressing about all of the legal and tax obligations,” he adds, pointing to special economic zones like Itana as ideal domestic launchpads.

Financially, Frank suggests pension fund trustees can anticipate a realistic Internal Rate of Return profile of 12% to 18% over a 10- to 15-year horizon. “Exits can happen easily when there is strong local backing,” he states. “Businesses that are selling themselves off to their partners or listing on the Nigerian Stock Exchange without trying to hit USD milestones.”

Fiduciary safeguards and implementation architecture

Executing this pivot requires an architecture that explicitly protects workers’ retirement savings. Frank strongly advocates for a Special Purpose Vehicle rather than a disjointed fund-of-funds approach.

“My preferred structure would be an SPV that is jointly managed by officials of PenCom and seasoned professionals from the PE and VC space,” Frank recommends. This hybrid structure grants administrators immediate operational oversight. “The PFAs also have stronger oversight and do not have to wait for reporting if it’s a fund-of-funds model,” he adds.

To satisfy strict fiduciary mandates, Frank outlines non-negotiable regulatory safeguards. “One of the interesting guardrails that can be set is for there to be co-investments with already established local PE and VC funds,” he proposes. He further stresses that supplementary protections covering corporate governance, debt thresholds, and phased capital disbursement schedules must be embedded directly within individual term sheets.

Crucially, this entire framework leaves the vast majority of the pension capital pool secure. “Remember that these businesses they are backing are early-stage businesses. Likely the founders are still in their early 20s and 30s and still have about 20 to 30 years to retire,” Frank notes. “And as I said, this is just 5% of their entire pool of capital, leaving 95% untouched.”

Nigeria does not have to build this framework in a vacuum. Frank points to regional peers for proven blueprints, specifically highlighting Ghana’s Ci Gaba fund of funds, which successfully committed 5% of domestic pension and insurance assets to local venture capital. “The Ci Gaba model is one where we need to borrow their policy notes and understand the power of systematic collaboration,” he urges.

When addressing the inevitable risks of high startup failure rates, potential scandals, and risk-bearing, Frank argued that the operational weight falls directly on the jointly managed Special Purpose Vehicle, which remains strictly answerable to regulators and institutional contributors. “If there is a liability, everyone, and the SPV in particular, would bear the brunt because this SPV would be reporting to PenCom and the PFAs,” Frank explained. 

However, he reframed the risk entirely, insisting that the single greatest threat to Nigerian pensions is not portfolio failure but institutional inertia. “The biggest liability currently facing the pension industry is inaction,” he warned, questioning whether administrators would prefer to watch their contributor base contract in sovereign debt or build a larger, job-creating pool that continually replenishes pension assets over the long term. “Rather than seeing scandals as failures, we see them as ways to iterate or pivot the model,” he reasons. “One case is the Electoral Act. Almost every four or eight years we have an amendment to fix unforeseen gaps. Good leadership is owning responsibility.”

To move this from theoretical discussion to concrete economic policy, Frank laid out a clear 12-month road map. “I want to see stakeholder convenings and an actual bill being sponsored as a follow-on to the Nigeria Startup Act, driven by the National Assembly alongside NITDA and NIDCOM,” he concludes.

For Frank, the justification for the policy requires looking past the immediate hurdles. “What is the grand story at the end of it all?” he asks. “The grand story is that 10,000 businesses can be supported, over 200,000 jobs created, up to 1.2 million people lifted out of poverty, and a GDP rise of over at the very minimum $3 billion.”