PenCom Raises Concern As ₦17.1tn Pension Funds Sit In FG Securities — Says Greater Diversification Needed For Inflation-Beating Returns
The National Pension Commission, PenCom, has raised concern over the heavy concentration of pension assets in Federal Government securities, warning that while such investments provide stability and preserve capital, they may not generate returns capable of consistently beating inflation over the long term.
Pension Fund Administrators, PFAs, had invested about ₦17.1 trillion of pension funds in Federal Government securities in the first quarter of 2026, representing 58.07 per cent of the industry’s total Net Asset Value of about ₦29.5 trillion.
The Commission said the concentration reflected the continued attractiveness of government securities in a high-yield environment, but cautioned that the pension industry needed to diversify more aggressively if it was to deliver stronger long-term, risk-adjusted returns for contributors.
“With 58.07% of pension assets invested in Federal Government securities, greater diversification is needed to support stronger long-term risk-adjusted returns,” PenCom stated.
It added that it would continue supervising PFAs to ensure that pension assets were managed prudently, in compliance with regulations and in the best interests of contributors.
PenCom noted that the pension system must remain financially sound, properly diversified and resilient to economic shocks if it is to fulfil its long-term obligations to workers and retirees.
According to the Commission, Federal Government securities continue to preserve capital and generate relatively stable returns, but their dominance in pension portfolios could limit the industry’s capacity to outperform inflation over a longer investment horizon.
“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,” the Commission said.
PenCom, however, observed early signs that PFAs were beginning to broaden their investment strategies under the revised pension fund investment framework.
It said allocations to mutual funds rose by 47.84 per cent during the quarter, while private equity allocations increased by 8.76 per cent.
The Commission described the movement as an early indication that the revised investment guidelines were beginning to influence portfolio construction.
It said it expected the trend to accelerate in the second and third quarters of 2026 as PFAs adjusted their strategies in line with the addendum to the Regulations on Investment of Pension Fund Assets issued in December 2025.
PenCom said the first-quarter portfolio structure reflected a pension industry that remained strongly anchored on Federal Government instruments but had begun, albeit cautiously, to explore a wider range of investment options.
Federal Government securities accounted for 58.07 per cent of pension NAV in the first quarter, down modestly from 59.50 per cent at the end of 2025.
Domestic equities, meanwhile, increased from 14.41 per cent to 18.50 per cent, driven largely by gains in the equity market.
Alternative assets accounted for 3.95 per cent of total pension assets and included increased exposure to mutual funds, private equity, real estate and Real Estate Investment Trusts, REITs.
The Commission said the emerging shift was important because the long-term sustainability of the pension system depended not only on preserving contributors’ capital but also on ensuring that investment returns were strong enough to protect the real value of retirement savings against inflation.
PenCom therefore maintained that while Federal Government securities would remain a major investment destination for pension funds, the industry needed a broader asset mix capable of balancing safety, liquidity and long-term growth.
The warning highlights the challenge facing PFAs as they seek to protect contributors’ funds while also delivering returns that remain meaningful in real terms amid inflation and changing economic conditions.
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