Attractive Returns Drive PFAs’ Stock, FGN Securities Portfolio to N19.8 Trillion

Kayode Tokede

Buoyed by the attractive returns in the stock market, investments by Pension Fund Administrators (PFAs) in equities and Federal Government of Nigeria (FGN) securities rose by N3.09 trillion to N19.8 trillion as of October 2025, up from N16.72 trillion in January, data from the National Pension Commission’s (PenCom) has shown.

PenCom’s latest monthly report showed that PFAs’ exposure to the equities market rose by N1.44 trillion over the period, closing at N3.84 trillion in October 2025, up from N2.41 trillion at the beginning of the year.

Investments in FGN bonds also expanded significantly, rising by N1.65 trillion from N14.31 trillion in January to N15.96 trillion in October.PenCom explained that FGN securities in PFAs’ portfolios include: FGN bonds held-to-maturity and available-for-sale, treasury bills, agency bonds issued by the Nigeria Mortgage Refinance Company (NMRC), Sukuk instruments, green bonds, and state government securities.Checks by THISDAY revealed that the combined investments in equities and FGN bonds accounted for about 74.27 per cent of the pension industry’s total net asset value of N26.66 trillion as of October 2025, underscoring the dominance of these asset classes in pension portfolios.

Market analysts attributed the rising exposure to equities to improving fundamentals in some listed companies, while noting that modest yields and the relative safety of government securities continue to shape PFAs’ preference for FGN bonds.FGN bonds, in particular, attracted strong investor interest in 2025, with yields exceeding 16.2 per cent on five-year bonds and about 15.8 per cent on 30-year tenors. While these returns are attractive in nominal terms, analysts cautioned that real yields remain modest, or even negative, given Nigeria’s elevated inflation rate of about 20.12 per cent.

Nonetheless, robust subscription levels by both local and foreign investors suggest growing confidence in the Central Bank of Nigeria’s ability to navigate monetary challenges, including persistent foreign exchange shortages and double-digit inflation.The increased participation of PFAs in the equities market contributed to an estimated N36.6 trillion in market growth in 2025, alongside N4.6 trillion in institutional investor transactions recorded in the first 10 months of the year.

Analysts told THISDAY that PFAs have been taking advantage of undervalued stocks amid naira depreciation and renewed investor confidence in the Nigerian capital market.They noted that domestic institutional investors responded sharply to macroeconomic pressures, including exchange rate weakness, high inflation, and the CBN’s elevated Monetary Policy Rate, which stood at 27.5 per cent in August 2025 before easing slightly to 27 per cent.

They also pointed to sustained growth in the pension industry, driven by regulatory reforms introduced by PenCom and by consolidation through mergers and acquisitions that have reduced the number of PFAs while strengthening the sector.Speaking with THISDAY, the Vice President of Highcap Securities, Mr. David Adnori, said the pension industry operates under strict regulatory oversight, given its responsibility for managing workers’ retirement savings.According to him, PenCom enforces clear investment guidelines and limits to safeguard contributors’ funds, particularly by restricting excessive exposure to volatile assets.

“This cautious approach is essential to protect contributors’ savings and ensure they have a secure and reliable source of income in retirement,” Adnori said. “PFAs therefore adopt a balanced mix of fixed-income and variable assets in their portfolios.”

He added that the diversified strategy reflects contributors’ risk tolerance and the different fund categories within the pension system, helping to balance safety, liquidity, and long-term returns.