Pension Fund Administrators (PFAs) invested about N17.1 trillion of pension assets in Federal Government securities in the first quarter of 2026, representing 58.07 per cent of the industry’s N29.5 trillion Net Asset Value (NAV).
The National Pension Commission (PenCom) has, however, warned that the continued concentration of pension assets in government securities could limit the industry’s ability to generate returns that consistently outpace inflation over the long term.
The warning comes amid sustained high yields in the money market, which have made Federal Government securities an attractive investment avenue for pension fund managers.
While acknowledging the importance of government securities in preserving pension assets and generating stable returns, PenCom said greater diversification was necessary to improve long-term, risk-adjusted returns for pension contributors.
“With 58.07 per cent 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 said.
PenCom stressed that the pension system needed to remain financially sound, diversified and resilient to economic shocks to fulfil its long-term obligations to contributors.
According to the Commission, the allocation to Federal Government securities continued to provide capital preservation and stable income but could constrain the system’s capacity to deliver inflation-beating returns over an extended period.
“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,” PenCom said.
The regulator noted, however, that there were early indications of increased interest in alternative investments following changes to the pension investment guidelines.
It said allocations to mutual funds and private equity rose by 47.84 per cent and 8.76 per cent respectively during the quarter.
PenCom said the changes suggested that the revised investment guidelines were beginning to influence how PFAs constructed their portfolios.
“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,” it stated.
The Commission said the composition of pension portfolios in the first quarter reflected an industry that remained heavily reliant on Federal Government securities, while beginning to explore a wider range of investment instruments.
Federal Government securities accounted for 58.07 per cent of total NAV during the quarter, a decline from 59.50 per cent at the end of 2025.
By contrast, domestic equities increased their share of pension assets from 14.41 per cent to 18.50 per cent, driven by gains in the equities market.
PenCom said alternative asset classes accounted for 3.95 per cent of pension assets at the end of the first quarter, comprising investments in mutual funds, private equity, real estate and Real Estate Investment Trusts (REITs).
The Commission said continued diversification would be important to strengthening the resilience of the pension industry and improving its capacity to deliver sustainable long-term returns to contributors.
