HOW PENSION FUNDS (PENCOM) CAN BE USED AS AN INVESTMENT TOOL IN NIGERIA

Pension funds in Nigeria, regulated by the National Pension Commission (PenCom), have evolved into significant investment vehicles that support both retirement security and long-term national development. Beyond saving for the future, pension assets now play a strategic role in infrastructure financing, real estate expansion, and private-sector growth.

1. Strong Commitment to the Real Sector

By 2025, PenCom reported that ₦5.51 trillion of pension assets had been channelled into the real sector. These include investments in infrastructure funds, private equity, real estate ventures, and state-level projects. This marks a major shift from the earlier focus on government securities to a broader investment approach that strengthens national productivity.

2. Pension Funds Boosting Infrastructure Development

Infrastructure investment by Pension Fund Administrators (PFAs) rose sharply in 2024, reaching ₦242.2 billion, a 54.1% increase from the previous year. Of this, ₦214.33 billion went into infrastructure funds and ₦27.92 billion into corporate infrastructure bonds. A year earlier, infrastructure accounted for barely 1.3% of total assets due to a shortage of eligible, bankable projects. The recent growth reflects better structuring of infrastructure financing and improved regulatory support.

A practical example is the ₦10 billion InfraCredit-backed infrastructure bond that supported the construction of a Compressed Natural Gas (CNG) plant in Ogun State. The project now supplies 144,000 SCM/day to industries and provides steady returns to pension contributors.

PFAs have also invested over ₦118 billion in Federal Government Sukuk bonds dedicated to road construction nationwide, combining secure yields with national infrastructural expansion.

3. Regulatory Reforms Strengthening Investments

PenCom’s 2025 guidelines require that at least 50% of all infrastructure fund investments must support projects domiciled in Nigeria. This ensures pension resources directly contribute to the country’s development. The Commission is also reviewing portfolio limits for infrastructure and private equity to allow higher allocations, enabling PFAs to take advantage of more viable long-term opportunities.

4. Real Estate and REITs as Key Components

Real estate remains a major destination for pension investment. In 2023, PFAs invested ₦1 trillion in real estate and Real Estate Investment Trusts (REITs), further strengthening Nigeria’s housing and commercial property markets.

A REIT (REAL ESTATE INVESTMENT TRUST) is a regulated investment company that owns or finances income-producing properties such as malls, offices, estates, and warehouses. Instead of buying physical property, investors purchase units in a REIT and earn returns from rental income and property appreciation. REITs offer:
• steady dividends
• diversified property exposure
• professional management
• greater liquidity than owning property directly

PFAs also invested ₦672.1 billion in a mix of real estate, sukuk bonds, green bonds, and REITs, balancing returns with sustainability and long-term stability.

5. Addressing Ongoing Challenges

Despite progress, Nigeria still faces an undersupply of bankable infrastructure projects, limiting the rate at which PFAs can deploy funds. To tackle this, PenCom is collaborating with the DMO, SEC, PenOp, and InfraCredit to develop more structured, credit-enhanced instruments suitable for pension investment.

In summary, PenCom-regulated pension funds are now powerful investment engines driving infrastructure, real estate, and private-sector growth. Through regulatory reforms and better investment vehicles like REITs, pension assets are steadily becoming catalysts for economic development while securing long-term wealth for Nigerian workers.

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