KEY POINTS

• The Pension Industry Leadership Council and FSD Africa have signed an agreement to establish a proposed $750 million infrastructure investment fund.
• Nineteen Nigerian pension funds have expressed interest, with an initial fundraising target of $350 million in 2027.
• The fund aims to attract $600 million from Nigerian pension funds and at least $150 million from development finance institutions.
• At least 60 per cent of its investments will go to Nigerian infrastructure projects.

MAIN STORY

Nigeria’s pension industry is seeking to mobilise up to $750 million for infrastructure development through a proposed investment fund being established in partnership with FSD Africa.

The Pension Industry Leadership Council (PILC) and FSD Africa signed an agreement to develop the Pension Industry Infrastructure Platform (PIIP), which will channel long-term capital from pension funds and development finance institutions into projects in Nigeria and selected African markets.

The National Pension Commission (PenCom) disclosed the agreement in a statement on Tuesday, noting that 19 Nigerian pension funds had already expressed interest in the initiative.

The platform targets $600 million from Nigerian pension funds and at least $150 million from development finance institutions. It plans to raise an initial $350 million at its first close in 2027.

The proposed fund will invest in equity and quasi-equity instruments, with at least 60 per cent of its portfolio allocated to Nigerian projects. The remaining investment capacity will be available for selected infrastructure opportunities in other African markets.

An initial assessment identified 39 Nigerian infrastructure projects with potential relevance to the platform, representing estimated investment needs of about $20 billion.

The proposed investments will focus on sectors including energy, transport and digital connectivity.

Its structure will include a naira-denominated core investment fund and a separate co-investment vehicle through which participating pension funds can invest alongside the main fund in selected projects. A parallel foreign-currency vehicle may also be established to accommodate international investors.

Under the agreement, FSD Africa will provide technical assistance and expert advice to PILC, including support for selecting a fund manager, engaging potential investors, building capacity and attracting development finance institutions. It will also support efforts to identify regulatory reforms required to establish the platform.

PILC Chair and PenCom Director-General, Omolola Oloworaran, said the initiative would help mobilise pension assets for infrastructure development while protecting contributors’ retirement savings.

She described the agreement as an initial step towards directing more of the pension industry’s long-term capital into productive investments.

FSD Africa Chief Executive Officer, Mark Napier, said the proposed fund was intended to help address Africa’s infrastructure financing gap.

UK Deputy High Commissioner in Lagos, Jonny Baxter, said the partnership reflected efforts by both countries to attract more domestic investment, including pension savings, into the real economy.

THE ISSUES

The proposed fund addresses a major financing challenge: infrastructure projects often require large amounts of money and take years to generate returns. Governments cannot always provide the capital needed to build roads, power infrastructure, transport systems and digital networks, while commercial banks may be reluctant to finance projects with long repayment periods.

Pension funds hold long-term savings collected from workers and employers. Because these funds are managed to meet retirement obligations that may fall due years into the future, they can potentially provide capital for carefully selected long-term investments. However, pension assets are not free government money. They belong to contributors and must be managed with their retirement benefits in mind.

That distinction explains why the proposed fund’s investment structure and safeguards matter. Equity investments give the fund a stake in a project, while quasi-equity instruments combine features of debt and ownership. Both can expose investors to risks if projects fail to deliver expected returns. The fund manager will therefore have an important responsibility to assess projects, manage risks and ensure that investments are consistent with the interests of pension contributors.

The $20 billion pipeline of 39 identified projects also shows the difference between available investment opportunities and actual financing. Identifying projects does not mean they are ready for funding. Each will still require assessment of its commercial viability, expected returns, construction risks, regulatory environment and ability to generate revenue.

The proposed allocation of at least 60 per cent to Nigerian projects is significant because it gives domestic infrastructure priority while allowing some investment across other African markets. The naira-denominated core fund could also help match investments with local projects, while a possible foreign-currency vehicle may attract international investors with different currency requirements.

For Nigeria, energy, transport and digital connectivity are important areas because inadequate infrastructure can raise operating costs for businesses, restrict productivity and limit economic growth. However, the eventual benefit will depend on whether the fund raises the targeted capital and finances projects that deliver reliable services and sustainable returns.

WHAT’S BEING SAID

“Both our countries are prioritising tackling the challenge of attracting more domestic capital, including from pension funds, into the real economy.” – Jonny Baxter, UK Deputy High Commissioner in Lagos.

“The pension industry holds the largest pool of long-term savings capital in the country.” – Omolola Olowararan, PILC Chair and PenCom Director-General.

“This MoU is the first step we are taking as an industry, and it is just the beginning.” – Omolola Olowararan, PILC Chair and PenCom Director-General.

WHAT’S NEXT

FSD Africa will support PILC in selecting a fund manager, engaging potential investors and completing the technical and regulatory work required to establish the platform.

The first fundraising target is $350 million in 2027. Reaching that milestone will be an important test of whether the initiative can convert interest from pension funds and development finance institutions into committed investment capital.

BOTTOM LINE

The proposed $750 million fund could provide a new channel for directing Nigerian pension savings into infrastructure development. Its success, however, will depend on raising the capital, selecting commercially viable projects and protecting the retirement savings entrusted to pension fund managers.