PenCom raises pension fund equity limits, driving growth for PFAs and liquidity into the Nigerian Exchange

The National Pension Commission (PenCom) has raised the allowable equity limits across Nigeria’s multi-fund pension structure, a move expected to inject fresh liquidity into the Nigerian Exchange (NGX) and enhance returns for Pension Fund Administrators (PFAs).

Also read: PenCom Launches PENCAP to Boost RSA Data Accuracy

The adjustment, part of the September 2025 Revised Regulation on Investment of Pension Fund Assets, increases exposure to ordinary shares across all three pension fund tiers, signalling a strategic shift from fixed-income instruments toward growth-oriented equities.

Abdulrauf Bello, portfolio manager at Cowrywise, said the policy would likely boost trading volumes and share prices.

“When PFAs allocate more of their asset under management growth to equities, that will drive transaction values and prices up. When prices rise, investors benefit,” Bello noted.

The new limits are set as follows:

Fund I (Aggressive): Equity cap increased to 35% from 30%
Fund II (Balanced): Raised to 33% from 25%
Fund III (Conservative): Now allows 15% exposure

Industry experts highlighted that the move also addresses Nigeria’s persistent inflationary pressures, which have eroded real returns on portfolios dominated by FGN bonds and Treasury Bills.

Market analysts project that even a 5-10% asset reallocation into equities could inject over ₦210 billion into blue-chip stocks, providing a notable liquidity boost for the NGX.

However, safeguards such as the Single Entity Exposure Cap, limiting investments in a single issuer to 25% of assets, remain in place to mitigate concentration risk.

The equity-cap adjustment coincides with ongoing consolidation in the pension sector ahead of the December 2026 recapitalisation deadline, which sets minimum capital for Category A PFAs at ₦20 billion, plus 1% of AUM for funds exceeding ₦500 billion.

Tosin Olaseinde, CEO of atMoney Africa, advised younger pensioners to consider a growth-oriented approach.

“Pensioners under 40 or even 45 can ask their fund manager to move them to RSA Fund 1. The risk is high, but returns are sweet,” he said.

Also read: PenCom Enforces Dollar Pension Contribution Reporting

With the Nigerian All-Share Index already up 11.78% year-to-date, analysts say PenCom’s directive could mark the start of a new growth phase for both pension funds and the equity market.