PenCom equity cap revision to unlock nearly N1tn
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The National Pension Commission has revised the investment limits upward for ordinary shares across RSA Funds I, II, III and VI-Active, a move that could unlock nearly N1tn in potential flows into Nigeria’s equities market, according to a new thematic report by CardinalStone Research.
According to the report, the regulator stated that the decision reflects the need to address implementation challenges associated with the Revised Regulation on Investment of Pension Fund Assets, published in September 2025, particularly issues related to limits on ordinary shares, FGN bonds, and alternative assets.
A lack of eligible instruments has constrained pension funds from investing in the alternative asset class, resulting in the cap being underused and leaving pension fund administrators with surplus liquidity.
The PUNCH reports that PenCom made changes to investment limits on ordinary shares, with Fund I’s new limit now increased to 35 per cent from 30 per cent and Fund II’s increased to 33 per cent from 25 per cent. Fund III’s new investment limit was raised to 15 per cent from 10 per cent, while the RSA Fund VI Active was moved upward by eight percentage points to 33 per cent from 25 per cent.
Justifying the regulator’s decision, the experts at CardinalStone stated that sector data revealed that Fund II was closing in strongly on the old 25.0 per cent limit, while Fund III was already in breach.
“Instructively, the positions do not account for the 6.3 per cent and 5.2 per cent market gains in January 2026 and February 2026 that may have further driven PFAs closer to some limits or even above, amidst pressure on bandwidth for proper portfolio decision-making.”
To estimate the possible impact, CardinalStone assumed the pension industry’s net asset value maintains the 21.9 per cent growth recorded in 2025. Based on projected 2026 assets under management and varying assumptions about how much of the new headroom PFAs utilise, the report outlines three scenarios.
Under a base case, assuming managers deploy 50 per cent of the freed headroom, the firm estimates that approximately N989.51 bn could flow into equities. A more conservative 30 per cent utilisation implies N593.71bn, while an 80 per cent utilisation scenario points to N1.58tn in potential flows.
“Whatever the outcome, the decision appears to be a good catalyst for an equities market that is already on a bright path. PFAs are also likely to leverage the rule to properly optimise their positions in fundamentally sound tickers, with their sell orders, previously hindering the take-off of these stocks, now expected to give way to buy orders and sustain the bullish momentum.
“The decision also combines with valuation attractiveness, growth expectations, a stable FX market, and moderating inflation to improve the case for Nigerian equities in 2026,” read part of the report.
If realised, the projected flows would represent a significant injection of domestic institutional liquidity into the market, positioning pension funds as a central force in shaping equity performance this year.
Another investment house, Comercio Partners, argued that the heavy allocation of pension assets to government securities has financed public deficits at the expense of private-sector growth while exposing contributors to persistent inflation.
It stated, “The revised equity limits, though modest by global standards, represent a pragmatic recalibration that aligns pension capital more closely with Nigeria’s structural development priorities. The policy is expected to channel long-term domestic savings into corporate investment, supporting expansion, working capital, and innovation, areas that have historically been underfunded relative to government borrowing.
“By redirecting capital from government bonds to equities, pressure on sovereign borrowing could moderate, potentially lowering yields and easing fiscal strain in an environment of elevated deficits.
“Expanding pension exposure to equities also improves expected retirement outcomes, as equities have historically delivered superior multi-year real returns in Nigeria, enhancing future consumption capacity and strengthening resilience against inflationary shocks. Greater participation in the equity market is likely to increase liquidity and turnover, improve price discovery, reduce volatility for listed companies, and encourage new listings, including mid-cap and growth-oriented firms that previously struggled to access patient capital.”
Comercio Partners maintained that the adjustment is not without risks, saying, “Rapid or excessive inflows into equities could create temporary concentration in a handful of large-cap stocks, potentially inflating valuations and exposing pension funds to market volatility. Sharp corrections would test the effectiveness of administrators’ risk-management frameworks, requiring careful oversight and proactive stewardship.”
The PUNCH reports that the Pension Broad Index outperformed the broader NGX All-Share Index, delivering a total return of about 59.7 per cent in 2025 compared to the ASI’s 51 per cent.
