Nigeria’s pension push into private markets hits policy snags

Nigeria’s push to channel pension funds into private equity and venture capital is running into fresh policy friction, raising concerns that regulatory changes meant to strengthen the market could instead slow capital deployment.

The tension came into focus at the Policy & Capital Summit 2026 held recently in Lagos, where regulators, pension fund administrators, and investors warned that misaligned rules risk undermining efforts to unlock one of the country’s largest pools of domestic capital.

With pension assets now exceeding N28 trillion, policymakers are increasingly looking to institutional investors to help finance infrastructure, startups, and other productive sectors amid tighter global liquidity.

Yet allocations to private markets remain marginal, held back by structural constraints and regulatory uncertainty.

“The objective is to move beyond conversation to coordination,” Anna Evi-Parker, executive secretary of the Private Equity & Venture Capital Association of Nigeria (PEVCA), said at the summit.

At the centre of the debate is a perceived disconnect between policy intent and implementation. While regulators are encouraging greater exposure to alternative assets, some of the new rules governing the industry are seen as poorly suited to its structure.

Michael Faramoti, co-founder and head of research at Stears, pointed to the Securities and Exchange Commission’s push to recapitalise fund managers as a key example. The move is aimed at strengthening firms and reducing operational risk, but he argued it does little to address the core risks investors face.

“The design of the policy leaves quite a bit to be desired and, more importantly, does not directly target the real risks in the space, particularly around investment risk,” Faramoti said.

Industry participants say such measures risk importing frameworks from traditional finance into a segment that operates differently.

Private equity and venture capital funds often use multi-jurisdictional structures, including offshore vehicles, to attract global investors. Treating these as foreign investments under local rules could trigger additional requirements and dampen participation.

“The irony is that regulators are encouraging pension funds to allocate to alternative assets, but at the same time imposing requirements that may run counter to how the industry operates globally,” Faramoti added.

The stakes are rising as Nigeria turns inward for capital. Foreign portfolio inflows have weakened in recent years, increasing pressure on domestic sources to fill the gap.

Data from the National Pension Commission show most pension assets remain concentrated in government securities and money market instruments, reflecting a cautious investment posture shaped by regulation and risk considerations.

Without a more calibrated framework, industry players warn that the shift into private markets may fall short of expectations.

“Strengthening Nigeria’s investment environment requires sustained alignment between policy direction and capital mobilisation,” said Yemi Osindero, chairman of PEVCA.

Beyond regulation, structural issues persist. Limited track records among local fund managers, governance concerns, and currency volatility continue to shape institutional investor behaviour.

Even so, expectations are that allocations will rise gradually.

“I do expect institutional investors to increase allocations over the next 24 months, but not at the pace the industry would like,” Faramoti said.

There are also concerns that higher capital requirements could reshape the industry itself. By forcing fund managers to focus on building their own balance sheets, the rules may constrain fundraising and investment activity, particularly for smaller or first-time funds that play a key role in early-stage financing.

That could further slow fund formation at a time when Nigeria’s startup ecosystem is already adjusting to a global venture capital downturn.

For regulators, the challenge is balancing financial stability with the need to foster innovation and long-term investment. For investors, clarity and predictability remain key.

As policymakers look to pension funds to help drive economic growth, the success of that strategy may hinge less on ambition and more on execution.

“Fortune favours the brave,” Faramoti said. “What will matter is the pace of change and whether reforms ultimately help or hinder the mobilisation of local capital.”