Fresh data from the National Pension Commission and the Pension Fund Operators Association of Nigeria reveal that while traditional holdings in government securities remain dominant, pension fund managers are increasingly expanding their stakes in alternative assets, signalling a gradual but decisive shift in the industry’s strategy, OLUWAKEMI ABIMBOLA writes
As the pension industry stakeholders have dialogues about the need to increase investments in alternative assets to bump up returns for pension contributors, data from the industry indicate that some operators have already belled the cat and have started to increase their stakes in infrastructure and private equity.
In June, the National Pension Commission, in collaboration with Financial Sector Deepening Africa, held a sensitisation workshop on alternative asset investments. During the workshop, the Director-General of PenCom, Omolola Oloworaran, said, “To secure better outcomes for contributors, we must be bold, data-driven, and forward-looking in exploring alternative investment vehicles.”
The British Deputy High Commissioner Jonny Baxter, in his comments, reiterated the United Kingdom’s commitment to supporting Nigeria’s transition to more strategic deployment of long-term capital, saying, “Nigeria’s pension industry represents a tremendous pool of long-term capital and stands as a testament to the country’s progress. However, a significant portion of these funds remains invested in conventional instruments, creating a compelling case for broader portfolio diversification into high-impact sectors.”
He emphasised that infrastructure, clean energy, and logistics are becoming increasingly attractive, underpinned by reforms and growing investor confidence, offering promising avenues for long-term investment.
At the workshop, a former chairman of the Chilean Pension Regulator, Guillermo Larraín, also presented a series of compelling case studies that drew from Chile’s experience in deploying pension assets into infrastructure, real estate, and private equity. He explored the regulatory consequences and practical realities of alternative investments, providing participants with tested frameworks and practical tools for implementation within the Nigerian context.
However, at the end of the first half of 2025, there had been a recorded increase in investments in infrastructure and private equity.
The Pension Fund Operators Association of Nigeria, in their analysis of the half-year data from the regulator, said, “Domestic ordinary shares rose by 40.9 per cent. This growth was supported by improved stock market performance, investor optimism, and the strategic rebalancing of pension fund portfolios towards equities. Total Federal Government of Nigeria securities, which remained the dominant asset class for pension funds, grew by 7.8 per cent. This was driven by higher yields in the fixed-income market and increased government borrowing through bonds and treasury bills. Commercial papers saw an exceptional growth of 112.6 per cent, indicating greater participation in short-term corporate debt instruments as pension funds sought to capture attractive interest rates in the money market.
“Investments in infrastructure funds grew 13.3 per cent, reflecting ongoing diversification into alternative assets to hedge against inflation and support national infrastructure development. Green bonds, which had no allocation in January, stood at N1.5bn in June, marking the first half-year inclusion of climate-focused investments in pension portfolios. Private equity investments grew 55.1 per cent, driven by a growing interest in high-potential unlisted companies and government encouragement for private capital mobilisation.”
On its social media page, PenOp asserted that the growth in pension assets in H1 2025, which stood at N24.63tn, can be attributed to a combination of factors: improved economic sentiment, attractive yields in the debt market, strong equity performance, and policy-driven incentives encouraging diversification into alternative and sustainable investments.
Disclosing where pension fund managers are looking to put money, the association noted that PFAs are taking a mixed approach to equities, with 67 per cent looking to increase their exposure, believing current prices are undervalued and offer upside potential.
However, 25 per cent plan to reduce their equity holdings, reflecting ongoing caution, and eight per cent look to reduce their allocation.
For fixed-income securities, which remained the preferred asset class of PFAs, PenOp said 67 per cent of fund managers expect to increase their allocation, particularly to government bonds, and 33 per cent will maintain their current allocation levels.
“This is driven by the Central Bank’s hawkish policy stance and continued focus on inflation control,” said PenOp.
Interest in infrastructure is surging, with 82 per cent of managers planning to increase investments in the sector, while 18 per cent of the surveyed PFAs said that they would be maintaining their current allocation.
PenOp said that the “shift is supported by a growing pipeline of bankable deals and strong government backing for infrastructure projects.”
Also, of interest to fund managers are the alternative investments, with 67 per cent saying they are open to increasing their exposure. However, many highlight the need for more specialist funds to support this transition.
Players in the Nigerian pension industry have called for regulatory guidelines that would enable them to invest in export-oriented businesses, toll roads, real estate and high-growth unlisted companies to boost returns. In a Bloomberg report, the Chief Executive Officer of the Pension Fund Operators Association of Nigeria, Oguche Agudah, was quoted as saying that investment in alternative investments can enable fund operators to cover any potential losses caused by a depreciating currency and inflation.
The Stanbic IBTC Pension Managers Ltd CEO, Olumide Oyetan, in his comments, said that the pension fund industry is also urging the authorities to issue floating-rate bonds that are indexed to the inflation rate, indicating that the availability of the securities would help operators maximise the value of their fixed-income portfolios, currently the largest portion of their balance sheets, and help them guard against negative real returns.
Both Stanbic IBTC Pension and Access ARM Pension also noted that they have already been increasing their investments in private equity, infrastructure funds and real estate investment trusts within the current rules.
Meanwhile, Agusto & Co. in its 2025 Nigerian Pension Industry Report argued that there were some challenges, one of which is the limited coverage of the pension system, “particularly within the informal sector, which constitutes approximately 93 per cent of Nigeria’s workforce as of Q2 2024.” The Micro Pension Plan (which has now been rebranded), designed to extend retirement benefits to self-employed and informal sector workers, recorded a 51 per cent increase in enrolment to 172,936 participants by the end of 2024. However, only six per cent of these accounts were funded, emphasising the need for more effective engagement and financial inclusion strategies.”
Another challenge that the experts highlighted was the persistent issue of negative real returns. “In 2024, the average inflation of 33.18 per cent significantly outpaced the nominal returns of 17.0 per cent across the industry’s Fund II, eroding the real value of retirement savings and posing a substantial risk to long-term retirement security,” read the Agusto & Co report.
A similar concern had been raised by the DG of PenCom at the inaugural Pension Industry Leadership Retreat, with industry stakeholders charged to change the narrative.
Despite these challenges, experts agree that the industry is poised for continued growth and call for efforts to expand participation in the informal sector. Addressing the challenge of negative real returns, enhancing operational efficiency, and regulatory innovation will be pivotal to sustaining growth.
