Operators eye private equity as pension funds hit N31trn

Nigeria's pension sector operators are considering private equity investments as they strive to grow pension funds, which currently total N31 trillion. This figure, larger than the 2024 federal budget, represents contributions from 11.27 million working Nigerians. The amount has nearly tripled since 2019, indicating consistent investment tools and regulatory structures.

The National Pension Commission (PenCom) has suggested expanding the scope for pension capital, increasing equity ceilings, broadening alternative asset allocation rules, and establishing dedicated frameworks for private equity and infrastructure co-investment. Pension funds are allowed to allocate up to 15% of their assets to private equity, but current utilization reveals its untapped potential.

Analysts suggest that the main obstacle is not investor willingness but the availability of suitable private equity funds that meet PenCom's requirements. As of mid-2026, government securities accounted for 50% of total pension assets, down from 70.8% in 2019. This shift has been mostly allocated to domestic equities and money market instruments.

Private equity, infrastructure funds, and REITs are still minor elements of pension diversification. PenCom identified private equity as the most underutilized asset class in a 2022 review but addressed this by introducing a co-investment framework. Industry statistics show that Nigerian pension funds allocate a larger share of their assets to private equity (1.7%) than their counterparts in South Africa, Kenya, and Ghana.

Despite the potential benefits, pension administrators are cautious due to the long-term nature of private equity investments and the lack of a secondary exit market. The Pension Fund Operators Association of Nigeria (PenOp) stated that the necessary infrastructure for pension-eligible private capital exists in Nigeria and is growing, citing examples of firms like African Capital Alliance, Verod Capital, and Sahel Capital. The model has also scaled successfully across other African markets.