Easing inflation, new guidelines spur risk appetite among pension managers

… shifts from bonds to equities

Easing inflation and improved macroeconomic stability are reshaping investment strategy across Nigeria’s pension industry, with fund managers signalling a stronger appetite for risk in 2026.

The latest Pension Fund Managers Sentiment Report shows growing confidence in the economic outlook, as moderating price pressures and the revised investment guidelines introduced by the National Pension Commission (PenCom) open up greater diversification opportunities.

With expectations of improved returns, pension managers are gradually rebalancing portfolios beyond government securities toward equities and alternative assets, while maintaining prudent risk controls.

Nigeria’s headline inflation moderated to 15.15 percent in December 2025 after sustained easing from previous highs, while improving further to 15.10 percent at the end of January 2026, according to Nigeria Bureau of Statistics data released Monday.

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The report, produced by the Pension Fund Operators Association of Nigeria (PenOp), states that following the introduction of the Revised Investment Guidelines, pension fund managers are increasingly reallocating portfolios toward new asset classes, with a notable rise in alternative investments.

“While exposure to bonds has edged down slightly, allocations to equities remain elevated, reflecting a stronger risk appetite and a search for higher returns.

“Pension fund managers are directing increased inflows into new asset classes and alternative investments. Equity markets are also seeing strong inflows, reflecting sustained risk appetite, while bond allocations have recorded modest outflows as managers rebalance portfolios in search of higher returns,” the report said.

According to the report, all pension fund managers surveyed expect the economy to improve over the next quarter, despite lingering uncertainties. They point to declining inflation, stronger consumer confidence, a gradual recovery in industrial and manufacturing activity, and rising credit flows to businesses as key factors supporting economic growth and stabilising the naira.

“The outlook on investor sentiment is largely positive. A significant 91 percent of pension fund managers expect investor sentiment to improve over the next quarter, while nine percent anticipate it will remain unchanged. This optimism, according to the report, is driven by moderating inflation, stabilising interest rates, and improving confidence in domestic market conditions.”

About 73 percent of pension fund managers plan to take on more risk in 2026, with increased allocations to equities and alternative assets, while bond exposure has edged lower.

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PenOp further notes that the revised PenCom Investment Guidelines have supported this shift by improving diversification opportunities and portfolio flexibility, while maintaining prudent risk standards. Overall, the outlook for 2026 is cautiously optimistic, with fund managers positioning for improved returns amid stabilising economic conditions.

According to the report, over 64 percent of fund managers surveyed indicated that their investment decisions will be largely influenced by market trends.

Pension fund managers overwhelmingly indicated that they will increase their investments over the next quarter, while 83 percent of those polled attributed rising assets under management to the need to expand their investment positions, despite the macroeconomic challenges.

Nigeria’s pension industry total assets under management closed at N27.45 trillion in December 2025, marking N399.27 billion month-on-month growth, based on PenCom’s unaudited monthly report on the industry.