2025 Economic outlook: A fresh perspective on Nigeria’s pension fund administration space

Nigeria’s pension sector stands at a pivotal moment. With assets under management reaching an unprecedented N22.5 trillion as at December 2024, the sector’s remarkable growth since the introduction of the Contributory Pension Scheme (CPS) in 2004 reflects its increasing sophistication and vital role in Nigeria’s economic landscape.

The transformation of Nigeria’s pension system has laid a robust foundation for long-term savings mobilisation, significantly contributing to GDP growth and capital market development. These funds have become a crucial source of patient capital, fuelling investments across diverse sectors of the economy. While infrastructure and real estate have traditionally been key beneficiaries, pension funds are increasingly exploring opportunities in sustainable energy projects, technology startups, and agricultural value chains – a diversification that promises to accelerate Nigeria’s economic transformation.

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The National Pension Commission (PenCom) has demonstrated commendable oversight in the regulatory sphere, implementing stringent guidelines to protect contributors’ interests. The Commission’s risk-based supervision framework has strengthened the sector’s resilience, while recent initiatives focusing on customer protection have enhanced transparency and accountability. However, there still lies the opportunity for the regulatory framework to evolve to address emerging challenges, particularly cybersecurity and environmental, social, and governance (ESG) investment considerations.

“The coverage gap remains significant, with a large portion of Nigeria’s workforce, particularly in the informal sector, still operating outside the pension system.”

Among industry players, Stanbic IBTC Pension Managers has notably pushed boundaries in several crucial areas – from pioneering initiatives to growing participation of the informal sector in the pension scheme, to maintaining robust capital adequacy that exceeds regulatory requirements. Their emphasis on public education, swift benefit disbursement, and digital accessibility have set new benchmarks for the industry.

Yet, the sector faces persistent challenges that demand attention. The coverage gap remains significant, with a large portion of Nigeria’s workforce, particularly in the informal sector, still operating outside the pension system. Administrative inefficiencies and the need for more diverse investment options constrain the sector’s potential impact on economic development.

In 2025, several transformative trends are poised to reshape the PFA landscape. First, the integration of artificial intelligence and blockchain technology promises to revolutionise fund administration, potentially reducing costs and improving service delivery. These technological advancements could enable more personalised retirement planning solutions and real-time portfolio management.

Second, the growing emphasis on sustainable investing will likely drive significant changes in portfolio allocation. PFAs will increasingly need to consider climate risks and sustainability metrics in their investment decisions, potentially leading to greater allocation toward green infrastructure and renewable energy projects.

Third, the rise of the gig economy and changing employment patterns will necessitate more flexible pension products. PFAs must innovate to serve workers with irregular income streams and multiple employment arrangements – a shift that could fundamentally alter traditional pension fund models.

The horizon also holds promising developments in cross-border pension portability, particularly within the African Continental Free Trade Area (AfCFTA) framework. This could have the potential of opening new investment opportunities and facilitating labour mobility across the continent, although it will require careful regulatory harmonisation.

Furthermore, pension funds’ role in capital market development is expected to deepen. Beyond traditional investments, PFAs may increasingly participate in alternative investment vehicles, including private equity and venture capital funds, potentially catalysing innovation and entrepreneurship in the Nigerian economy.

Customer protection mechanisms are also likely to evolve, with increased emphasis on financial literacy and transparency. Adopting open pension platforms could empower contributors with better access to information and more control over their retirement planning decisions.

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Ultimately, the success of Nigeria’s pension sector will increasingly depend on its ability to balance multiple objectives: ensuring adequate returns for contributors, thereby facilitating national development; and maintaining strong risk management practices. The sector must also prepare for demographic shifts as a younger population with different expectations and needs enter the workforce.

The path ahead requires a delicate balance between innovation and stability; growth and security; inclusion and sustainability. Success will depend on continued regulatory evolution, technological adaptation, and industry collaboration. As Nigeria’s pension sector matures, its potential to serve as a cornerstone of economic development and social security becomes increasingly apparent.

The challenge now lies in harnessing this potential while ensuring that pension fund management’s benefits extend to all segments of society. In 2025, the sector’s ability to adapt to changing circumstances while maintaining its fundamental role in providing retirement security will be crucial in determining its contribution to Nigeria’s economic future.

Olumide Oyetan, chief executive, Stanbic Pension Managers Limited