Nigeria’s pension industry recorded a remarkable surge in 2024, with total pension assets climbing to an unprecedented N22.51 trillion, marking an impressive 22.65% year-on-year increase from N18.36 trillion in 2023.
This growth, as revealed by the National Pension Commission (PenCom) in its unaudited pension fund portfolio report, is believed to be a reflection of the changing investment climate and also an evolving regulatory framework that continues to shape the industry’s trajectory.
The expansion was accompanied by a steady rise in Retirement Savings Account (RSA) registrations, which reached 10.58 million by the end of December 2024. This 3.84% growth, adding 390,899 new enrollees within the year, signals increasing participation in the Contributory Pension Scheme (CPS) amid rising awareness and regulatory enforcement.
Register for Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register to become a better CEO or Director with Tekedia CEO & Director Program.
Fixed Income Reigns Supreme
A deep dive into the pension industry’s portfolio composition reveals a strong inclination toward fixed-income investments, which accounted for 83.72% of total pension assets, amounting to N18.85 trillion. The preference for fixed-income securities, particularly federal government instruments, is largely attributed to their tax-exempt status and low-risk appeal.
Among the standout components of this asset class, federal government securities dominated with a staggering N14.11 trillion, representing 62.70% of the total pension fund. State government securities, however, remained a marginal allocation at N250.86 billion, a modest 1.11% share. Corporate debt securities held their ground with N2.25 trillion, making up nearly 10% of the portfolio.
However, not all fixed-income instruments witnessed gains. Commercial paper investments saw a dramatic slump, plummeting 38.67% from N262.79 billion in 2023 to N161.16 billion in 2024. The decline followed PenCom’s October 2024 suspension of commercial paper investments due to regulatory uncertainties for non-bank capital market operators. This restriction was eventually lifted after the Securities and Exchange Commission (SEC) intervened to provide clarity on investment guidelines.
Equities and Alternative Investments Gain Traction
Equities remained a growing asset class within the pension industry’s investment mix, with total equity holdings valued at N2.66 trillion, representing 11.81% of total pension assets. Domestic ordinary shares accounted for the bulk of this at N2.24 trillion, while foreign equities stood at N267.99 billion. Notably, private equity investments, though relatively small, reached N147.86 billion, highlighting a strategic shift toward diversified, high-return opportunities.
Beyond traditional asset classes, pension fund administrators explored alternative investments, channeling funds into infrastructure, real estate, and mutual funds to diversify risk. Infrastructure funds grew to N214.33 billion, while real estate investments reached N283.62 billion, reinforcing the industry’s commitment to broadening its asset base.
Fund II Maintains Lead in Pension Asset Allocation
When broken down by fund type, Fund II continued to dominate with N9.24 trillion, representing 41.02% of total pension assets. Fund II serves as the default allocation for contributors under 49 years, allowing exposure to equities, infrastructure, and other long-term, higher-risk investments. Fund III followed with N5.92 trillion, while Fund V had the smallest allocation at N731.4 million.
Meanwhile, the Retiree Fund (Fund VI), which adopts a more conservative investment approach focusing on capital preservation, stood at N10.48 billion.
Regulatory Reforms and Industry Leadership Changes
The pension industry’s expansion in 2024 coincided with significant policy shifts and leadership changes within PenCom. Notably, the commission reinstated investments in commercial paper after addressing concerns regarding the involvement of non-bank capital market operators.
Additionally, a major regulatory change will take effect on February 1, 2025, requiring the mandatory use of Bank Verification Numbers (BVN) for RSA registration and data recapture. This policy aims to enhance the security and integrity of the pension database, reducing fraud and identity duplication within the system.
Further shaping the industry’s landscape was the appointment of Omolola Oloworaran as acting Director-General of PenCom in 2024. Although she assumed office without Senate confirmation, Oloworaran has pledged to sustain the industry’s growth trajectory, expand CPS membership, and enhance pension coverage across the country.
With regulatory reforms taking shape and investment strategies evolving, the sector appears set for further expansion. However, sustaining this growth, which observers say depends on PenCom’s ability to balance risk and ensure compliance, is one of the biggest challenges facing the sector.
