Amid Attractive Yields, PFAs Exposure in Stocks, FGN Securities  now 73.9% of Pension Fund 

Kayode Tokede

Efforts to get Pension Funds Administrators (PFAs) to invest in infrastructure may not materialise as

attractive yields has continued to drive PFAs to the capital markets.

THISDAY analysis of the latest National Pension Commission (Pencom) monthly report, showed that the PFAs exposure in equities and FGN securities is now responsible for about 73.9 per cent or N20.29 trillion of the total pension fund value of N27.45 trillion.

The report revealed that PFAs exposure in stock market and the Federal Government of Nigeria papers has increased significantly, attributable to attractive returns.

The  report revealed that the PFAs exposure in the stock market appreciated to N3.96 trillion of as December 2025, about N1.71 trillion or 76.4per cent Year-on-Year (YoY) increase over N2.24 trillion in 2024.

For FGN Securities, it closed December 2025 at N16.33 trillion, a growth of N2.22 trillion or 15.7 per cent YoY  from N14.11trillion reported by Pencom in 2024.

FGN Securities comprises of FGN Bond Held-till-Maturity (HTM), FGN Available-for-Sale (AFS), Treasury Bills,Agency Bonds (NMRC), Sukuk (HTM), Sukuk (AFS), Green Bonds, and State Govt Securities.

Analysts have attributed PFAs increasing exposure in the stock market to increasing fundamentals of some listed  companies in 2025, stressing that modest yield  and risk-free government securities continued to influence PFAs exposure in FGN Bonds.

The FGN Bonds witnessed significant patronage by investors in 2025 with yields over 16.2 per cent on five-year government bonds and .15.8 per cent on 30-year government bonds.

These yields are quite high in nominal terms. But real returns (i.e. after inflation) may be modest or even negative if inflation remains high. For example, inflation at ~20.12 per cent  (or thereabouts) means a 16per cent nominal yield gives you a negative real return.

Local and foreign investors seem to respond positively to the double-digit interest rates on FGN  Bonds, as seen in the robust subscription rates, suggesting confidence in the CBN’s ability to manage the country’s monetary challenges amid scarcity of foreign exchange and double-dight inflation rate.

The participation by PFAs in the stock market led to a N36.6 trillion growth in 2025 and domestic institutional investors transacted an estimated  N5.62trillion in 2025 from N2.43trillion in 2024.

Analysts expressed to THISDAY that PFAs are benefiting from the undervalued stocks amid the weakening of the Naira and renewed investors’ confidence in the Nigerian stock market.

They stated that the PFAs and domestic investors reacted sharply to naira depreciation in the foreign exchange market, double-digit inflation rate, coupled with the CBN’s MPR at 27 per cent  in 2025.

The analysts further said the pension industry has been recording significant growth in recent years, following several regulatory reforms by PenCom, which has seen the number of PFAs in the industry reduce as a result of some mergers and acquisitions.

The Vice President, highcap securities, Mr. David Adnori explained to THISDAY that the pension Industry operates under stringent regulations due to the nature of handling public funds, primarily the contributions of workers meant for their retirement.

According to him, PenCom enforces guidelines and limits to ensure the safety and security of contributors’ funds as restrictions are placed on PFAs regarding the allocation of contributors’ funds into volatile assets.

“This cautious approach is in line with the need to protect contributors’ savings and ensure that they have a secure and reliable source of income during their retirement years. To achieve this, the PFAs adopt a mix of fixed and variable assets in their investment portfolios. This diversified approach takes into consideration the risk tolerance of contributors and the different fund categories within the pension system,” he said.

Responding to PFAs exposure in the stock market, Investment Banker & Stockbroker, Mr. Tajudeen Olayinka explained that PFAs and investors reacted to low prices of some fundamental stocks on the exchange.

He explained further that, “Prices had become too low to resist, and this happened because of prolonged repricing of securities across markets and instruments, pushing down stock prices below the levels they should ordinarily be. It also demonstrates improved earning capacities of some listed companies, as they continue to adjust to variability of costs and cost pressures in the short run, in order to stay afloat. Another factor is the usual positioning and repositioning for year-end rally by investors, as some companies begin to show strong earnings’ prospects ahead of full year results.”