Nigeria is preparing to revise its pension investment regulations to allow a greater share of the country’s $17 billion pension assets to be allocated to infrastructure and private equity, in a strategic move aimed at boosting returns for retirees and supporting national development.
The National Pension Commission (PenCom) is in the final stages of reviewing the current 5% cap on pension fund investments in these alternative asset classes, according to Ibrahim Buwai, PenCom’s spokesman.
While specific figures have yet to be disclosed, Buwai indicated that the new limits could be announced before the end of the current quarter.
Plans to Reduce Regulatory Requirement
In addition to raising the investment ceiling, the Commission plans to “significantly” reduce a regulatory requirement that mandates infrastructure funds must allocate at least 60% of their portfolios to projects domiciled in Nigeria.
This adjustment is expected to broaden the scope of eligible investments and enhance diversification opportunities for pension fund administrators.
The proposed reforms come amid mounting pressure from pension fund managers, who have called for greater flexibility to invest beyond traditional fixed-income instruments.
Currently, fixed-income securities account for 62% of pension fund assets, but persistent inflation, hovering above 20% for two consecutive years, and a roughly 70% depreciation of the naira against the U.S. dollar have eroded real returns.
“We are not really okay with returns the way they are because inflation is having significant negative impact,” Buwai said. “We really want to see traction in those alternative assets to complement returns from the fixed income and the traditional assets.”
Role of Pension in Nigeria’s Economic Development
In April, PenCom Director General Omolola Oloworaran highlighted the growing role of pension funds in Nigeria’s economic development. She revealed that pension fund investments totaling N5.51 trillion have been strategically deployed into infrastructure, private equity, real estate, and subnational initiatives.
Oloworaran also reported a 22.65% year-on-year increase in the industry’s Net Asset Value (NAV), rising from N18.36 trillion in December 2023 to N22.51 trillion by December 2024. This growth was attributed to consistent contributions and rising investment income.
Despite the progress, Oloworaran flagged a key challenge: the limited availability of investable instruments that meet regulatory standards. Only 86 instruments currently meet the required liquidity and free float criteria, underscoring the need for broader reform to unlock new investment avenues.
What You Should Know
- Earlier in August, President Bola Tinubu named Opeyemi Agbaje as the new Chairman of the National Pension Commission, in a move expected to douse concerns around the governance of the commission.
- A seasoned professional whose career spans law, banking, academia, consulting, and public service, Agbaje brings a wealth of experience and thought leadership to Nigeria’s pension sector at a time when the industry is navigating growth, reform, and heightened public expectations.
