Pension funds shift gears: PenCom’s call to back equities starts showing in N27.45tr asset base

Nigeria’s pension industry, long criticised for parking vast sums in low-risk government securities, appears to be easing off the brakes.

New figures for the year ended December 31, 2025 show total pension assets climbed to N27.45 trillion, with a notable uptick in domestic equity holdings to nearly N4 trillion.

In the same vein, the CPS as established by Pension Reform Act (PRA) 2004 repealed by PRA 2014 has been reversed to a Pay As You Go scheme in accordance to the Act.

These are part of the paradigm shifts that have happened in the pension industry in about four years.

The shift may be subtle, but it shows the first clear signs of pension funds responding to strategic direction from the National Pension Commission (PenCom) to diversify beyond sovereign bonds and embrace growth-oriented instruments.

This change didn’t happen by accident. Last year PenCom Director-General, Ms. Omolola Oloworaran stressed the need for pension money to do more than just sit in government paper, urging fund managers to expand into equities, alternative assets and instruments that can deliver better returns for contributors over the long term.

A deliberate pivot toward growth

Historically, pension administrators have been extremely cautious, often allocating over 80per cent of funds to Federal Government bonds and treasury bills. That strategy protects capital, but at a cost, it limits growth potential in a market where inflationary pressures and currency swings have eroded real returns.

In speeches and policy engagements throughout 2025, Oloworaran repeatedly pushed for greater allocation to higher-yielding assets, especially equities and alternatives, as part of a broader diversification effort. Analysts said the intent was to unlock “stranded liquidity” in pension portfolios that had limited options under older investment caps.

The penalty for staying too conservative, she argued, would be long-term value loss for retirees, especially in an economy where inflation has consistently outpaced yields on low-risk instruments.

Early evidence

The December portfolio statistics show domestic ordinary shares now account for nearly N3.96 trillion of pension assets.

Foreign equity exposure, though modest, is also present at about N263.9 billion.

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At the same time, the giant weight of sovereign debt — roughly N16.33 trillion, remains intact, underscoring that the industry is opening up gradually to growth opportunities.

The growth in equities is not dramatic, but it is meaningful: pension funds are moving beyond their traditional comfort zone of stable but low-growth government securities and testing growth assets in a real market setting.

Why this shift matters

Pension funds represent one of the largest pools of institutional capital in Nigeria and how that capital is invested matters for the broader economy.

At the equity markets, pension inflows can provide sustained demand for listed companies, helping deepen market liquidity.

For the corporate sector, increased pension investment in corporate bonds, equities and private instruments can ease credit constraints.

To achieve long-term growth, diversification into assets like infrastructure and private equity, areas PenCom has flagged as priorities aligns with the long-term nature of pension liabilities.

For retirees and contributors, the shift could mean better returns over time which is crucial for preserving real value in the face of inflation.

What’s next?

PenCom’s revised investment guidelines, issued late last year, raised equity exposure limits, in some funds from 25per cent to as high as 35per cent specifically to encourage deeper pension participation in the stock market.

Yet the industry remains prudent. Government securities and money-market instruments still dominate, reflecting ongoing concerns about liquidity and risk, especially in a volatile macroeconomic environment.

But Oloworaran has sent a clear message that safety is important, but so is growth.

The December data suggests pension fund managers are listening and adjusting their strategies, even if cautiously. For Nigeria’s capital markets and long-term economic recovery, the change seems here.