Pension Fund Administrators (PFAs) are increasingly investing in private equities and infrastructure funds to maximize high-yield opportunities.
According to analysts at the Pension Fund Operators Association of Nigeria (PenOp), this shift is fueled by the potential for higher returns and favorable policy incentives despite the inherent risks.
An analysis of asset allocation by PFAs over the past year reveals that private equities experienced the most significant growth, surging by 106.35 percent from N71.66 billion in 2023 to N147.86 billion in 2024. “This indicates a growing interest in alternative investments,” PenOp analysts stated.
They explained that while alternative investments typically carry greater risk compared to traditional asset classes, they also offer the advantage of outperforming inflation in a high-yield environment. Infrastructure funds followed as the second-fastest-growing asset category, increasing by 49.49 percent from N143.37 billion in 2023 to N214.33 billion by the end of 2024. “This trend emphasizes a heightened focus on infrastructure investment, likely driven by policy measures that encourage pension fund involvement in long-term development initiatives.”
Domestic and foreign equities saw a 41.8 percent rise, climbing from N1.77 trillion to N2.51 trillion, supported by another strong year for the Nigerian All Share Index. Money market instruments expanded by 32.9 percent, reaching N2.22 trillion from N1.67 trillion, as Nigerian treasury bill yields hit record highs amid central bank efforts to curb inflation and attract investors.
FGN securities, which remain the largest asset class, posted a more moderate growth of 18.37 percent, increasing from N11.92 trillion to N14.11 trillion. “The slower growth rate suggests that while government bonds continue to be a dominant investment choice, there is a gradual shift toward equities and alternative assets,” analysts noted.
Similarly, corporate debt securities increased by 17.8 percent, rising from N1.91 trillion to N2.25 trillion. By investing in private equities and infrastructure funds, PFAs aim to secure strong returns by leveraging the growth potential of alternative assets over conventional investment vehicles, said Chika Onwunali of Premium Debate.
He highlighted that alternative investment strategies are gaining popularity as a means to drive superior growth in an uncertain market environment. Aguda Oguche, CEO of PenOp, commented on the asset growth within Closed Pension Fund Administrators (CPFAs), noting that domestic and foreign equities rose by 71.6 percent from 2022 to 2023 and by 34.7 percent from 2023 to 2024. He attributed this growth primarily to the naira devaluation, as CPFAs hold a significant portion of their assets in foreign equities denominated in hard currency.
FGN securities increased by 21.2 percent between 2022 and 2023, and by 14.1 percent from 2023 to 2024, while corporate debt securities experienced the highest growth, rising by 77.9 percent in 2022-2023 and 64.9 percent in 2023-2024.
By the end of December 2024, the net asset value of Nigeria’s pension industry stood at N22.512 trillion, reflecting a N254.53 billion increase from N22.258 trillion in November 2024. Regarding enrolment, a total of 10,582,299 Retirement Savings Account (RSA) holders have been registered under the Contributory Pension Scheme (CPS), according to official data.
