The Role of Pension Funds in Addressing Nigeria’s Infrastructure Deficit
The Pension Fund Operators Association of Nigeria (PenOp) has highlighted the crucial role that pension funds can play in addressing the country’s infrastructure deficit. According to the association, the industry represents the largest pool of long-term capital available for investment. This potential was emphasized during the launch of PenOp’s maiden Infrastructure Report in Lagos.
According to Agusto & Co., Nigeria faces a significant infrastructural gap, requiring up to $3tn over the next 30 years to bridge it. The firm pointed out that achieving this goal would require the Federal Government to spend the equivalent of its entire 2021 budget of N13.58tn annually on capital expenditure for the next 100 years. This staggering figure underscores the urgency and scale of the challenge facing the nation.
At the report launch, Akinbola Akintola, Head of Research and Investment Relations at PenOp, explained the purpose of the report. He stated that the document aims to educate stakeholders on how to make infrastructure projects more attractive and bankable for pension fund investment. “We asked ourselves, how can the pension industry, which represents the largest pool of investable capital, play a role in infrastructure development while ensuring contributors’ funds grow?” he said. “That’s why we produced this report, to guide policy, deepen the financial market, and ensure these investments are structured in ways that pension funds can confidently participate.”
Akintola noted that the report targets a wide audience, including financial market operators, government policymakers, infrastructure promoters, and the public. He added that contributors also need to understand how their pensions are invested. “Our primary audience is infrastructure project promoters who must structure their financial assets in ways that meet pension fund criteria,” he said. “Pension funds are highly regulated, so investments must be de-risked to guarantee contributors’ protection.”
Key Sectors for Pension Fund Investment
Akintola highlighted that pension fund administrators prefer core infrastructure sectors such as power and telecommunications, which have historically delivered solid returns. “Power and telecoms have been the main investment focus because they offer consistent returns while addressing critical needs,” he said. “Nigeria’s huge power deficit and its young, tech-driven population make these sectors particularly attractive.”
He further revealed that pension funds had indirectly invested in Lagos State’s Blue Line rail project through bonds. “Regulations discourage direct construction financing but allow participation through bonds and project-linked funds,” he explained.
Collaboration Between Public and Private Sectors
Akintola emphasized the need for collaboration between the public and private sectors to close Nigeria’s infrastructure gap. “Government can play a big role in de-risking projects through guarantees, first-loss capital, or by maintaining policy consistency,” he said. “These measures inspire confidence among private investors.” He cited the proposed MOFI Real Estate Investment Fund as an example of blended finance.
In the foreword of the report, PenOp noted that Nigeria’s infrastructure deficit is evident in its poor roads, inadequate rail systems, dilapidated airports, lack of running water, and chronic electricity shortages. “Over the years, the government has attempted to address these challenges through budgetary allocations and borrowing, but such efforts have proven insufficient. The private sector must now play a more significant role in funding infrastructure sustainably,” the report stated.
Growth and Future Prospects
While pension fund investment in infrastructure has grown from virtually zero in 2004 to about 1.3 per cent of pension assets, PenOp said there is still significant room for expansion. It is hoped that the report will help bridge the gap between pension fund managers and the infrastructure market, catalysing more investments.
The launch of the report came shortly after the National Pension Commission issued new investment guidelines expanding the range of eligible asset classes. The new rules introduced options such as reverse repos, gold receipts, securities lending, private placements, derivatives (for risk management only), commodity-backed instruments, and agriculture investment funds.
Meanwhile, Nigeria’s total pension fund assets have surpassed the N25tn mark, closing August 2025 at N25.89tn. According to the National Pension Commission’s monthly report, the funds first crossed the threshold in July, rising from N25.79tn to N25.89tn in August, an increase of about N97.88bn.
