FG Securities Dominate Pension Assets as Investors Seek Safety and Yield
The National Pension Commission (PenCom) has reported an 18.7% year-on-year increase in pension fund investments in Federal Government (FG) securities for the first quarter of 2025 (Q1’25). The total value of these investments rose to ₦14.48 trillion, up from ₦12.20 trillion in the corresponding period of 2024 (Q1’24).
This uptrend was detailed in PenCom’s Q1 2025 industry portfolio report, which tracks the performance and allocations of pension assets across the Nigerian financial landscape.
High MPR, Low Risk Drive Investor Preference
Market analysts attribute the surge to the continued high interest rate environment maintained by the Central Bank of Nigeria (CBN). Since December 2024, the Monetary Policy Rate (MPR) has held steady at 27.5%—a benchmark that influences yields on government and corporate securities.
According to Victor Chiazor, Head of Investment and Research at Fidelity Securities Limited, the elevated MPR has incentivized pension fund administrators (PFAs) to increase allocations to fixed-income government instruments.
“The rise in PFAs’ investments in Government securities in the first quarter was triggered by the high interest rate environment. The CBN has maintained a tight policy stance in an effort to combat inflation,” Chiazor noted.
FG Securities Account for 62% of Total Pension Assets
As of March 31, 2025, total pension fund assets stood at ₦23.32 trillion, with Federal Government securities comprising 62% of that figure. The portfolio of FGN securities includes instruments such as:
- FGN Bonds (Hold Till Maturity and Available for Sale)
- Treasury Bills
- Sukuk Bonds
- Green Bonds
- Agency Bonds
The most dominant component remains the Hold Till Maturity (HTM) FGN Bonds, which accounted for ₦12.389 trillion or 85.5% of total FGN securities. These were followed by:
- Available for Sale (AFS) FGN Bonds – ₦1.397 trillion (9.6%)
- Treasury Bills – ₦593.22 billion (4.1%)
- Sukuk Bonds – ₦9.25 billion (0.6%)
Risk-Return Tradeoff Still Favors FGN Securities
Despite relatively stronger returns in the equities market in recent months, PFAs have continued to favor government securities for their stability and predictable returns.
Mallam Garba Kurfi, Managing Director/CEO of APT Securities and Funds Limited, remarked:
“The investment in FGN Bonds by PFAs is necessary due to their availability and comparatively lower risk profile. While equities have delivered higher returns recently, the safety and volume offered by FGN securities make them more attractive for pension portfolios.”
Outlook: Conservative Strategy Likely to Persist
As inflationary pressures persist and interest rates remain elevated, market participants expect PFAs to maintain their conservative investment posture. The dominance of FGN securities in pension portfolios reflects a strategic balance between preserving capital and earning reasonable returns in a high-rate environment.
With interest rates unlikely to ease in the near term, PFAs may continue to overweight their exposure to government instruments—particularly long-duration bonds offering secure and inflation-beating yields.