Analysts say sustained CBN rate hikes and low-risk appeal drive pension managers’ shift to money market instruments….
Investments in fixed income securities by Nigerian pension fund administrators (PFAs) rose sharply by 17.7 percent year-on-year (YoY) in the first eight months of 2025, reaching ₦2.405 trillion, compared to ₦2.043 trillion recorded during the same period in 2024.
The figure was contained in the latest Pension Funds Industry Portfolio Report released by the National Pension Commission (PenCom), which reviewed industry performance up to August 31, 2025.
According to the report, the fixed-income or money market category comprises fixed deposits, bank acceptances, commercial papers, and foreign money market instruments.
High MPR Boosts Demand
Market operators have attributed the upswing in money market investments to the Central Bank of Nigeria’s (CBN) sustained high Monetary Policy Rate (MPR) over the last two years, which has made such instruments increasingly attractive.
The MPR, which serves as the benchmark interest rate for government and corporate debt instruments, had been maintained at an elevated level to curb inflation. It peaked at 27.5 percent before a marginal reduction to 27 percent last month.
Experts say the slight easing was aimed at supporting economic growth while maintaining control over inflation after months of gradual disinflation.
Breakdown of Money Market Assets
Findings show that money market securities accounted for 9.28 percent of the total ₦25.895 trillion pension fund assets as of August 2025.
A breakdown reveals that:
- Fixed income securities accounted for ₦1.872 trillion or 77.8 percent of total money market investments.
- Commercial papers followed with ₦226 billion, representing 9.4 percent.
- Foreign money market instruments ranked third at ₦102 billion, or 4.2 percent.
Analysts Weigh In
Commenting on the development, David Adonri, Analyst and Vice Chairman, said the shift by PFAs towards money market instruments was both strategic and necessary given current economic realities.
“The investment in money market securities by PFAs is attractive because of the higher yields driven by elevated interest rates and the relatively lower risk involved,” he explained.
Adonri, however, advised pension fund managers to continue diversifying their portfolios to optimize returns for contributors while mitigating risk exposure in a volatile economy.
With inflationary pressures still shaping monetary policy, analysts expect pension funds to maintain a strong bias toward fixed-income and money market assets in the near term, balancing safety with consistent returns for retirees and contributors alike.
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