Operators in Nigeria’s pension sector are exploring private equity investments as part of a new drive to expand pension funds which currently stand at N31 trillion as checks by Daily Trust have shown.

The figure is more than the entire 2024 federal budget, and contributed by 11.27 million working Nigerians.

The amount has nearly tripled in size since 2019, which signals consistency in investment tools and regulatory architecture.

Already the industry regulator, the National Pension Commission (PenCom) in 2025 had advocated widening the lane for pension capital to do more, raising equity ceilings, expanding alternative asset allocation rules, and building dedicated frameworks for private equity and infrastructure co-investment.

With regulations allowing pension funds to allocate up to 15 per cent of their assets to private equity, current utilisation underscores the untapped potential within the asset class.

Pension assets have also been projected to approach N100 trillion within five years as contributors’ participation deepens.

Challenge lies in market readiness not investor willingness

Further checks by Daily Trust as highlighted in PenCom’s regulatory assessments, has shown that the key challenge is not investor willingness but market readiness.

It highlighted that the constraint lies in the limited availability of qualifying, investable and PenCom-compliant private equity funds capable of attracting pension capital.

Further analysis has shown that at the end of 2019, Federal Government securities accounted for 70.8 percent of total pension assets.

By mid-2026, that share had declined to the high -50 percent range, even as total industry assets nearly tripled.

Much of the capital reallocated from government securities flowed into domestic equities, now valued at over N6 trillion, and money market instruments, which exceed N3 trillion.

This trend demonstrates that Pension Fund Administrators (PFAs) are both willing and capable of reallocating capital when suitable investment opportunities are available.

Private equity, infrastructure funds, and Real Estate Investment Trusts (REITs) remain relatively small components of this diversification journey.

In a 2022 internal review, PenCom identified private equity as one of the industry’s most underutilized asset classes.

However, rather than viewing this as a structural weakness, the regulator responded by introducing a dedicated co-investment framework designed to strengthen the private equity ecosystem.

This was followed by further regulatory reforms in September 2025 and February 2026, which broadened the eligibility criteria for investment vehicles and eased allocation requirements. Collectively, these measures signal that the regulatory foundation needed to support greater pension investment in private markets is steadily taking shape.

What Nigeria stands to gain

Industry statistics showed that private equity investment in pension funds is not unique to Nigeria; but reflects a broader pattern across Africa’s leading pension markets.

According to a 2024 estimate by the African Private Capital Association (AVCA), Nigerian pension funds allocate a larger share of their total assets to private equity (1.7 percent) than their counterparts in South Africa (0.8 percent), Kenya (0.7 percent), and Ghana (0.5 percent).

The same pattern emerges when private equity allocations are assessed relative to each country’s regulatory limit for alternative investments.

Subsequently, Nigerian pension funds utilized about 1.7 per cent of their 10 percent private equity allocation limit.

By comparison, Ghanaian pension funds utilized approximately 1.1 percent of their 25 percent alternatives ceiling, South African funds about 0.8 percent of their 15 percent limit, while Kenyan funds utilized roughly 0.7 percent of their 10 percent limit.

These comparisons suggest that the challenge is not unique to Nigeria but reflects a wider continental reality: across Africa’s major pension systems, regulatory capacity has generally outpaced the availability of investable private market opportunities.

A 2026 joint report by Stears and the African Private Capital Association (AVCA) reinforces this pattern across the four markets: pension systems have expanded significantly, while the private capital ecosystem is still evolving to match the scale of available institutional capital.

Among its continental peers, Nigeria holds the largest pool of pension assets, positioning it to benefit the most from a deeper private equity market.

As the pipeline of qualifying for PenCom-compliant investment funds expands, the country has the potential to unlock substantial pension capital for productive long-term investments, accelerating both private sector growth and broader economic development.

Why PFAs are cautious

Despite the huge potentials of private equity investments, Pension Fund Administrators are also being careful as their core obligation first is to ensure that money is there when a contributor needs to retire, to switch funds, or to access benefits.

Government securities are priced daily and can be sold within days; while private equity typically locks up capital for seven to ten years, in a market that doesn’t yet have a deep secondary exit option.

Why the model is working – PenOp

The Pension Fund Operators Association of Nigeria (PenOp) has stated that the infrastructure for pension-eligible private capital exists in Nigeria today, and it is growing.

They cited examples with firms like African Capital Alliance, Verod Capital, Synergy Capital, and Sahel Capital who have built real track records investing in Nigerian companies within PenCom-compliant structures.

“InfraCredit backed by the Nigeria Sovereign Investment Authority and GuarantCo has been cited by Harvard Business School as a model for how guaranteeing infrastructure bonds can unlock pension confidence in instruments they’d otherwise avoid.

“Elsewhere on the continent, the model has already scaled meaningfully. South Africa’s Eskom Provident Pension Fund and the Kenya Power Pension Fund jointly committed more than $94 million into the Africa Development Partners III fund and the Everstrong Kenya Infrastructure Fund.

“South Africa’s Public Investment Corporation, the continent’s largest asset manager, put $100 million in equity into the Africa Finance Corporation. African pension capital moves into private markets at real scale once the right structures exist. Nigeria has every reason to expect the same trajectory,” it said

PenOp added that although private equity and venture capital are often discussed together, they carry different risk profiles.

“Venture Capital backs early-stage companies that fail more often than they succeed, by design, and Nigeria’s exit market trade sales, secondary buyouts listings is still developing the depth that gives institutional capital confidence to commit. Currency mismatches, where startups raise in dollars but earn in naira, add a layer, pension managers reasonably want addressed before committing contributor capital directly.

“The more realistic near-term path is indirect: diversified fund-of-funds structures that spread early-stage risk across many companies, sized as a small, deliberate slice within a broader private equity allocation, not direct bets on individual startups.

“This is a sensible, sequenced approach, rather than a reason to wait. This is not a gap PenOp is content to describe from the sidelines.

“Over the years, PenOp has convened knowledge-sharing sessions for member PFAs bringing in private equity fund managers, infrastructure financiers, and regulators to walk through how PenCom-compliant structures actually work, what governance standards a fund needs to meet before it’s investable, and how other African pension markets have approached the same allocation question.

“The goal is straightforward: a fund manager cannot commit contributor money to an asset class they haven’t been given the tools to properly evaluate. PenOp’s role, as the industry’s collective voice, is to close that knowledge gap building the in-house underwriting confidence our members need, and creating a structured channel between PFAs and the fund managers seeking pension-eligible capital.”

Way forward

Asides frequent sessions, deeper technical training on valuation and governance review, and closer engagement with PenCom on the qualified-fund pipeline, the Pension Fund Operators have also proposed three recommendations.

“Three things, already in motion, will determine how quickly this gap closes.

First, Nigeria needs more PenCom-qualified private equity and infrastructure funds and the regulator’s recent reforms, in September 2025 and February 2026, show it is actively working that lever, not waiting for the market to solve it alone.

“Second, fund managers need to keep meeting the reporting and governance standards pension funds are required to demand, and the firms already operating at that bar show is achievable.

“Third, pension funds themselves are building deeper in-house expertise to evaluate these investments directly, reducing reliance on a small handful of intermediaries, exactly the kind of capability PenOp’s training sessions are designed to accelerate,” the Operators further explained. (Daily Trust)

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