Market disruption unlikely as PFAs race to meet new capital requirement

Nigeria’s pension industry is unlikely to experience major market disruptions in the ongoing push by Pension Fund Administrators (PFAs) to meet new minimum capital requirements set for players.

Industry experts say most leading PFAs are already well capitalised, reducing the risk of instability or widespread consolidation.

While smaller operators may feel some pressure, the overall structure of the market is expected to remain largely intact, according to two industry experts who spoke on the matter.

The National Pension Commission (PenCom) in a circular issued on September 26, 2025, announced revised minimum capital requirements for Licensed Pension Fund Administrators (LPFA) and Pension Fund Custodians (PFCs), giving them 30th June 2027 to recapitalise or lose their license.

Under the new framework, PFAs with Asset Under Management (AUM) below N500 billion will require at least N20 billion in capital, while PFAs with AUM of N500 billion and above will require N20 billion, plus one percent of the portion of their AUM above N500 billion.

Read also: PenCom affirms June 2027 recapitalisation deadline for PFAs as merger pressure heightens

While special purpose PFAs, including NPF Pensions Limited, will recapitalise with N30 billion, Nigerian University Pension Management Company Limited will recapitalise with N20 billion.

Existing PFCs will require N25 billion + 0.1 percent of AUC, while a new PFC licence will require N25 billion.

Dave Uduanu, immediate past managing director of Access Arm Pensions Limited, who expressed confidence that the ongoing recapitalisation drive in the industry will not significantly disrupt existing operators, said most leading PFAs already possess the required capital base.

Speaking on the sector’s outlook, Uduanu said he does not expect merger pressure from the new capital requirements because major players are already well capitalised.

“I don’t think there will be merger pressure because many of the players already have the required capital of N20 billion.

According to him, while the policy may affect smaller operators, it is unlikely to fundamentally alter the structure of the industry. He noted that the sector is already dominated by a handful of large PFAs controlling the majority of pension assets.

“Currently, with Stanbic IBTC, Access ARM, Leadway, Trust Fund, Premium, and FCMB, controlling almost 70–80 per cent of the market, the industry is not going to consolidate further around them. The smaller players will continue to manage,” Uduanu stated.

However, he explained that one significant impact of the recapitalisation requirement would be the difficulty for new entrants seeking to establish PFAs.

“The most important impact is that new players will no longer be able to enter the industry. Bringing N20 billion to start a PFA will be difficult,” he said, adding that recapitalisation pressures are being experienced across the financial services sectors, including insurance, banking and capital markets.

Uduanu noted that while most PFAs already meet the capital requirement, firms whose assets exceed specific thresholds may need to raise additional capital. He said this would likely be manageable for large operators. “Even the larger firms should be able to meet this. It may simply mean they do not pay dividends this year, or they may return to shareholders to raise additional capital,” he explained.

Read also: PFAs raise investment in equities by 86% on returns

He further emphasised the inherent stability of the pension industry, citing strong institutional ownership as a major advantage.

“I am not worried about the pension sector because it is very stable. These companies are owned by large institutions. Stanbic is owned by Stanbic Bank, Access ARM by Access Bank, Leadway by Leadway Assurance, FCMB by FCMB Bank, and the Trust Fund has strong institutional backers. This is different from insurance companies that are often owned by individual investors,” he said.

Uduanu acknowledged that Premium Pensions stands out as being largely owned by individual investors, but maintained that its shareholders possess sufficient financial strength to meet regulatory demands.

Agudah Oguche, the immediate past chief executive officer of Pension Fund Operators Association of Nigeria (PenOp), shared similar views with Uduanu, stating that there is unlikely to be any disruption to the structure of the industry.

Oguche, who is also the founder of HRISP Partners, noted that large PFAs are not expected to face challenges meeting the new capital requirements because they are backed by large institutions with substantial financial resources.

“I see the PFAs wanting to remain independent at the end of the recapitalisation,” he said, adding that the industry still holds enormous growth potential.

He explained that only about 11 million workers have been registered under the Contributory Pension Scheme (CPS), while a significant portion of workers in the informal sector remain outside the pension net.

“I am confident the sector will comply with the capital requirement, and the two-year time frame again is an advantage, Oguche said.

“What will be of greater concern is how PFAs utilise the funds after recapitalisation,” Oguche said. “PFAs will need to justify the additional investment through the dividends they pay, as the parent institutions will assess whether injecting more funds into PFAs yields better returns compared to alternative investments, such as bank branch expansion,” he added.

He further stated that PFAs are likely to invest in new technologies, improve service delivery, recruit more qualified personnel, and introduce innovations that will make the industry more competitive and rewarding.

PenCom in December 2025 reaffirmed that the recapitalisation of PFAs remains on course, warning that non-compliant operators risk losing their licenses by the June 2027 deadline when the exercise would have ended.

Read also: Overview of Nigeria’s ₦20 billion shareholders’ fund requirement for PFAs

Omolara Oloworaran, director general of PenCom, who made the disclosure while responding to questions at the 2025 Pension Revolution Summit and Media Conference, held in Lagos, said PFAs that cannot recapitalise have the option of merger or acquisition to meet the requirements within the stipulated timeframe.

“We have communicated the requirements to PFAs, and we expect every PFA to be compliant by June 2027. Any PFA that is not compliant will have its license revoked. It is that simple.

Oloworaran said, based on our engagements, all PFAs will either meet the requirements on their own or find partners to merge with. Therefore, you may see some mergers and acquisitions.

“What I can tell you is that recapitalisation is on track. The industry agrees with us, they really have no choice but to recapitalise, she said.

Modestus Anaesoronye is a leading Nigerian financial journalist with over two decades of experience reporting on the insurance and pension sectors across Nigeria and West Africa. He has held key editorial positions at major national media outlets, including The Comet, The Nation, and Financial Standard, and currently serves as a Senior Financial Analyst at BusinessDay Media Ltd.

A widely travelled reporter, he has covered industry developments in more than 14 countries across Africa and Asia.

Anaesoronye is a multiple award-winning journalist, honoured several times as Insurance Journalist of the Year and Pension Journalist of the Year by recognised industry bodies, including PensionScope and the Pension Fund Operators Association of Nigeria (PenOp), among others.

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