Pension Fund Administrators (PFAs) are retreating from government securities and diversifying to other assets that promise them higher returns.
In 2019, PFAs’ exposure to government securities stood at 71 percent, but this has reduced to 62 percent this year.
One area PFAs have found a new opportunity is in infrastructure funds, where their assets value rose by 43 percent in one year, moving from N152.36 billion in February 2024 to N218.55 billion in February 2025, according to data from the National Pension Commission (PenCom).
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Analysts at Pension Fund Operators Association of Nigeria (PenOp) said although low-risk government securities remain dominant, the growing allocation to infrastructure and alternative funds signals a shift towards greater diversification and potential for higher returns
“With 62.2 percent of its assets allocated to FGN securities, Nigeria’s pension fund reflects a cautious and stable investment strategy favoured by many investors,” PenOp said.
“Low-risk government securities remain the preferred choice of asset class but the growing allocation to alternatives highlights opportunities for greater diversification and potentially higher returns.”
The association noted that equities (domestic and foreign shares) made up 12.24 percent, while corporate debt securities and money market instruments accounted for 10.1 percent and 9.49 percent, respectively.
According to PenOp, corporate debt securities and money market instruments together account for nearly 20 percent of Nigeria’s pension investments, underscoring a balanced approach to risk and return.
The same motive in 2024
Oguche Agudah, CEO of PenOp, in his analysis of the market late last year, said PFAs were turning to private equities and infrastructure funds in pursuit of high-yields.
Agudah said this was driven by the potential high returns of the assets and policy incentives, even as they came with high risks.
“Analysis of assets allocation by PFAs over a one-year period shows that private equities recorded the highest increase, growing by 106.35 percent, from N71.66 billion in 2023 to N147.86 billion in 2024.”
This suggested a rising interest in alternative investments, he also said.
According to industry analysts, alternative investments usually pose a higher risk than traditional asset classes but provide the potential upside of beating inflation in a high-yield environment.
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At the end of 2024, infrastructure funds were the second largest growth assets, recording a 49.49 percent increase, rising from N143.37 billion in 2023 to N214.33 billion, data from the industry showed.
“This reflects an increasing emphasis on infrastructure investment, possibly driven by policy incentives encouraging pension fund participation in long-term development projects,” they argued.
Infrastructure funds
As of August 30, 2024, the total capital raised by infrastructure funds in Nigeria was about N330 billion ($200 million) with these funds managing assets worth N236.4 billion. Nigeria Infrastructure Debt Fund (NIDF) is the largest among these funds with a total net asset of N103.5 billion as well as an asset portfolio worth N108.6 billion.
NIDF is followed by Stanbic IBTC Infrastructure Fund, with an asset portfolio worth N49.4 billion at the end of 2023.
Other infrastructure funds approved by the Securities and Exchange Commission (SEC) in Nigeria are: ARM/Harith Infrastructure Fund, Africa Infrastructure Plus Fund, Africa Infrastructure Plus Fund 2, United Capital Infrastructure Fund, Actis and Coronation Insurance Fund.
