Nigeria’s pension fund managers are calling for updated regulatory guidelines that would allow them to diversify investments into alternative assets such as export-oriented businesses, toll roads, real estate, and high-growth unlisted companies. They argue that such measures are crucial to protecting contributors’ savings from the impact of high inflation and currency depreciation, which continue to erode the real value of returns.
According to Bloomberg, industry stakeholders believe broadening investment options is necessary to strengthen the long-term sustainability of the N24.63 trillion pension fund, the bulk of which remains tied to government-backed securities. Monthly data from the National Pension Commission (PenCom) shows this concentration in fixed-income assets leaves the funds vulnerable to negative real returns in the current macroeconomic environment.
The Chief Executive Officer of the Pension Fund Operators Association of Nigeria (PenOp), Oguche Agudah, emphasized that pension funds are increasingly considering alternatives to offset potential losses from traditional portfolios. Similarly, the CEO of Access ARM Pensions, Dave Uduanu, outlined opportunities in sectors like export-oriented industries, infrastructure projects such as toll roads, real estate, and private companies with strong growth potential.
Stanbic IBTC Pension Managers’ CEO, Olumide Oyetan, added that operators are also advocating for the issuance of floating-rate bonds indexed to inflation. He explained that such instruments would help preserve value in fixed-income holdings, which remain the largest component of pension fund portfolios, while offering a hedge against inflation-driven losses.
Despite regulatory constraints, some pension managers are already gradually diversifying. Both Access ARM Pensions and Stanbic IBTC confirmed that they have been expanding allocations to private equity, infrastructure funds, and real estate investment trusts within the limits of existing rules. This mirrors a global trend, with private credit now representing a $1.5 trillion market worldwide as institutional investors seek better returns in alternative assets.
PenCom, in response, has confirmed that a review of investment guidelines is underway, with new regulations expected before the end of the quarter. At a sensitisation workshop held in Lagos for board members of Pension Fund Administrators (PFAs), the commission encouraged operators to adopt more dynamic investment strategies that reflect current realities.
Speaking at the event, PenCom’s Director-General, Omolola Oloworaran, stressed that the economic challenges of rising inflation, foreign exchange volatility, and declining purchasing power demand a different investment approach. She highlighted alternative assets as a vital complement to traditional strategies, noting that infrastructure and private equity, in particular, align well with pension funds’ long-term horizons while improving diversification and enhancing risk-adjusted returns.
Nigeria’s economic backdrop underscores the urgency of these reforms. Inflation reached 21.88 per cent in July and has remained in double digits since 2015, consistently weakening the value of fixed-income assets. At the same time, the naira has depreciated by nearly 70 per cent against the U.S. dollar since May 2023 following the harmonisation of foreign exchange market segments.
Against this backdrop, pension fund managers are urging regulators to provide the flexibility needed to channel a portion of the N24 trillion fund into investments that can withstand macroeconomic shocks and generate sustainable returns for millions of Nigerian contributors.
