The National Pension Commission (PenCom) has signaled a major boost for Nigeria’s stock market by raising equity investment limits for the country’s N21 trillion pension industry. Analysts say the move will channel more liquidity into the Nigerian Exchange (NGX), driving transaction volumes and potentially boosting returns for Pension Fund Administrators (PFAs) and investors alike.
Under the September 2025 Revised Regulation on Investment of Pension Fund Assets, PenCom increased the ceiling for Variable Income Instruments, specifically ordinary shares, across all pension fund tiers. This strategic adjustment comes amid persistent inflation, which has eroded returns from traditional, fixed-income-heavy portfolios favored by Nigerian PFAs. Abdulrauf Bello, portfolio manager at Cowrywise, explains, “When PFAs allocate more of their assets to equities, it drives transaction values and prices up. Investors ultimately benefit from rising prices.”
Historically, Nigerian pension funds have been heavily concentrated in government bonds and Treasury Bills, with over 65 percent of Assets Under Management (AUM) tied up in sovereign debt. The new caps now allow Fund I (Aggressive) to hold up to 35 percent in equities, Fund II (Balanced) up to 33 percent, and Fund III (Conservative) up to 15 percent. Experts see the timing as strategic, with cooling interest rates creating a more favorable environment for growth-focused investments.
Market watchers expect the policy shift to trigger a significant liquidity influx into the NGX, with even a 5-10 percent allocation shift from fixed income to equities potentially bringing in over N210 billion to blue-chip stocks. PenCom has maintained safeguards, however, including the Single Entity Exposure Cap of 25 percent per corporate issuer, to mitigate concentration risk that could affect institutional portfolios.
For investors, this change opens up new opportunities. Pensioners under 40 or 45, for instance, may consider moving to RSA Fund I for higher growth potential, though the risk is greater. With the NGX already up 11.78 percent year-to-date, coupled with ongoing pension industry consolidation and recapitalization, analysts say this could mark the beginning of a robust market rally, benefiting both PFAs and individual investors.
source: Business day