PFAs Put N17.1tn Pension Assets into FG Securities

PFA pension investments in Federal Government securities reached N17.1 trillion in the first quarter of 2026, accounting for 58.07 per cent of the industry’s N29.5 trillion Net Asset Value.

The National Pension Commission (PenCom) disclosed the figure in its latest assessment of Nigeria’s pension industry, while warning that the heavy concentration in government securities could limit the system’s ability to generate inflation-beating returns over the long term.

The high allocation comes as pension fund managers continue to take advantage of strong yields in the money market. Federal Government securities remain a major investment option for pension funds because they provide capital preservation and relatively stable returns.

However, PenCom said relying too heavily on the instruments could restrict the growth potential of pension assets over an extended period.

PenCom stated: “With 58.07% of pension assets invested in Federal Government securities, greater diversification is needed to support stronger long-term risk-adjusted returns. The Commission will continue to supervise PFAs to ensure prudent, compliant management of pension assets in the best interests of members.”

The regulator stressed that the pension system needs to remain financially sound, diversified and resilient enough to withstand economic shocks while protecting members’ interests over the long term.

According to the Commission, the large allocation to Federal Government securities continues to preserve capital and provide stable income, but it also limits the system’s ability to consistently beat inflation.

The report stated: “The FGN allocation continues to preserve capital and generate stable carry, but it also caps the ability of the system to deliver inflation-beating returns over the long horizon.

“Movement in the alternatives allocation, up 47.84% in mutual funds and 8.76% in private equity within the quarter, is early evidence that the revised investment guidelines are beginning to influence portfolio construction.

‘‘The Commission expects this trend to accelerate as PFAs recalibrate strategies during Q2 and Q3 under the addendum to the Regulations on Investment of Pension Fund Assets issued in December 2025.”

PenCom said the first-quarter portfolio composition showed an industry that still relies heavily on the Federal Government investment window, although PFAs have started exploring a broader range of investment instruments.

Federal Government securities accounted for 58.07 per cent of pension industry NAV, down modestly from 59.50 per cent at the end of 2025.

At the same time, domestic equities increased from 14.41 per cent to 18.50 per cent, supported by the rise in equity prices during the quarter.

The allocation to alternative assets also reached 3.95 per cent. This category includes mutual funds, private equity, real estate and Real Estate Investment Trusts (REITs).

The movement towards alternative investments suggests that revised pension investment rules are beginning to influence how PFAs manage pension assets. Mutual fund allocations rose by 47.84 per cent during the quarter, while private equity increased by 8.76 per cent.

PenCom expects this diversification to gain further momentum in the second and third quarters as pension managers adjust their portfolios under the December 2025 addendum to the Regulations on Investment of Pension Fund Assets.

The regulator’s warning highlights the challenge facing Nigeria’s pension industry. While Federal Government securities offer stability and capital protection, excessive dependence on them could reduce the potential for stronger long-term growth.

For pension contributors, broader diversification could provide access to additional sources of returns while spreading investment risks across different asset classes. However, PenCom will continue to supervise the industry to ensure that any shift away from government securities remains prudent and compliant with investment rules.

The latest figures therefore point to a gradual change in PFA pension investments, with government securities still dominating portfolios but equities and alternative assets gaining ground.

Can greater diversification help Nigeria’s pension industry deliver stronger returns without exposing contributors to excessive risk?