Pension Fund Administrators (PFAs) invested about N17.1tn in Federal Government securities in the first quarter of 2026, accounting for 58.07 per cent of the pension industry’s N29.5tn Net Asset Value (NAV).
The National Pension Commission (PenCom) has raised concerns over the heavy concentration of pension assets in government securities, warning that while the investments provide stability and relatively predictable income, they may struggle to generate returns that consistently exceed inflation over the long term.
The regulator said PFAs needed to diversify their portfolios further to improve long-term, risk-adjusted returns and protect pension savings from economic shocks.
“With 58.07% of pension assets invested in Federal Government securities, greater diversification is needed to support stronger long-term risk-adjusted returns,” PenCom said.
The commission added that it would continue monitoring PFAs to ensure pension assets were managed prudently and in accordance with investment regulations.
Government securities still dominate
PenCom’s first-quarter assessment showed that government securities remained the dominant asset class in the pension industry, although their share of total assets declined slightly from 59.50 per cent at the end of 2025 to 58.07 per cent.
The commission attributed the continued preference for Federal Government instruments partly to the high-yield environment in the money market, which has made government securities attractive to pension fund managers seeking capital preservation and stable income.
However, PenCom cautioned that this strategy could limit the industry’s ability to generate inflation-beating returns over a much longer investment horizon.
According to the commission, the government securities allocation continues to provide capital preservation and stable returns, but the concentration also places a ceiling on the potential growth of pension assets in real terms.
The regulator said the pension industry needed to become more diversified and resilient, particularly given the long-term nature of retirement savings.
Equities and alternative investments gain ground
While government securities continued to account for the largest share of pension assets, domestic equities recorded notable growth during the quarter.
The allocation to domestic equities increased from 14.41 per cent at the end of 2025 to 18.50 per cent in the first quarter of 2026, reflecting gains recorded in the Nigerian equities market.
PenCom also reported increased exposure to alternative investments.
Alternative assets accounted for 3.95 per cent of total pension NAV, with the category covering mutual funds, private equity, real estate and Real Estate Investment Trusts.
The commission noted that investments in mutual funds rose by 47.84 per cent, while private equity allocations increased by 8.76 per cent during the quarter.
PenCom described the movement as an early indication that changes to the pension investment framework were beginning to influence how PFAs structure their portfolios.
The commission expects the shift towards a broader range of investment instruments to continue as fund managers adjust their strategies during the second and third quarters of 2026.
New investment rules drive portfolio changes
PenCom said the changes were partly linked to the revised investment guidelines introduced through an addendum to the regulations governing pension fund investments in December 2025.
The regulator expects PFAs to make greater use of the expanded investment options as they reassess their portfolios and seek to balance safety, liquidity and long-term returns.
The commission said the first-quarter portfolio composition reflected an industry that remained heavily anchored to Federal Government instruments but had begun to explore other asset classes.
The modest reduction in government securities’ share, combined with the rise in equities and alternative investments, suggests a gradual shift in portfolio construction.
Balancing safety with long-term returns
Pension funds are invested over extended periods, making the balance between capital preservation and growth particularly important.
PenCom noted that government securities would continue to play a significant role because of their relative stability and ability to provide regular income. However, excessive concentration in a single asset class could limit the potential for stronger long-term returns.
The regulator therefore stressed the importance of diversification across equities, mutual funds, private equity, property-related investments and other approved instruments.
It said a financially sound pension system must not only preserve members’ savings but also remain capable of withstanding economic shocks and generating sustainable returns throughout the retirement savings cycle.
The latest figures indicate that Nigerian pension managers are beginning to move gradually in that direction, although Federal Government securities remain overwhelmingly dominant in the industry’s investment portfolio.
