Analysts link growth to high interest rate regime and low-risk appeal of government instruments….
Investments by Nigeria’s Pension Fund Administrators (PFAs) in Federal Government (FG) securities surged by 18.1 percent year-on-year to ₦15.824 trillion as of August 2025, compared to ₦13.396 trillion recorded in the same period of 2024.
The figures are contained in the latest industry portfolio report released by the National Pension Commission (PenCom), covering the first eight months of the year.
Analysts say the increase was largely driven by the high interest rate environment maintained by the Central Bank of Nigeria (CBN) and the relative safety of government instruments.
High Interest Rates Drive Investment Shift
Market operators noted that the CBN’s Monetary Policy Rate (MPR) which was raised to 27.5 percent earlier this year before easing slightly to 27 percent has made Federal Government securities more attractive for institutional investors.
The MPR serves as the benchmark interest rate influencing returns on both government and corporate debt instruments.
“Investments in FGN bonds are rising because they are readily available and less risky,” said Mallam Garba Kurfi, Managing Director of APT Securities Limited. “Even though equities have shown higher returns recently, the high-interest environment and safety of government securities make them more appealing to PFAs.”
He added that the trend reflects the funds’ cautious approach amid inflationary pressures and market volatility.
FGN Securities Dominate Pension Assets
According to PenCom, Federal Government securities accounted for 61.1 percent of total pension assets, which stood at ₦25.895 trillion as of August 2025.
The investment breakdown shows:
- Hold-To-Maturity (HTM) FGN Bonds — ₦13.284 trillion (83.9%)
- Available-For-Sale (AFS) FGN Bonds — ₦1.18 trillion (11.4%)
- Treasury Bills — ₦610.3 billion (3.9%)
- Sukuk Bonds — ₦100.8 billion (0.63%)
- Green and Agency Bonds — marginal holdings.
Analysts say the dominance of bonds in pension portfolios reflects PFAs’ preference for stable, long-term returns consistent with their liability structures.
Policy Outlook
The CBN’s slight MPR reduction in October, it’s first in months was seen as a balancing act to sustain economic growth while keeping inflation in check.
Despite calls for portfolio diversification, experts believe PFAs will continue to favour government instruments in the near term, given high yields, low risk, and limited alternative investment options.
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