Low Pension Fund Investment in Infrastructure Reflects Unattractive Market and Regulatory Constraints
Despite Nigeria’s significant infrastructure deficit, pension fund investments in the sector remain around one percent, far below the 15 percent benchmark set by the Pension Reform Act. The National Pension Commission (PenCom) report for August shows that while total pension fund assets reached N21.1 trillion, only N172.5 billion—0.82 percent—was invested in infrastructure. This trend has persisted over the past few months, with the bulk of pension assets, 59.7 percent, instead invested in Federal Government bonds, which offer low risk and stable returns.
Experts attribute the low investment in infrastructure to an unattractive investment climate and a lack of eligible financial instruments. According to PenCom, Pension Fund Administrators (PFAs) are hindered by the limited availability of secure and tradable investment vehicles for infrastructure. As a result, PFAs continue to prioritize government bonds over infrastructure, which they view as safer and more reliable. The Commission expressed support for developing more suitable instruments that align with the Pension Reform Act, noting that these would need to ensure transparency, fair valuation, and liquidity.
Some industry leaders, including Ivor Takor of the Center for Pension Rights Advocacy, argue that a more robust institutional and legal framework could help mobilize long-term pension funds for infrastructure development. Takor emphasized that the absence of viable investment options limits the ability to address Nigeria’s infrastructure needs. He suggested that with more eligible investment vehicles, pension funds could play a significant role in reducing the country’s infrastructure gap over time.
