Can Pension Funds be Borrowed for Infrastructure Projects?

The Tinubu Administration has never hidden the fact, that it inherited a near empty treasury at its inception. This explains why the Federal Government’s debt profile, is spiralling upward. But, when allegedly, there was an announcement about Government’s intention to borrow from Pension Funds to develop the critical infrastructure sector, not a few eyebrows were raised as to the propriety or otherwise of such a design. The Minister of Finance & Coordinating Minister of the Economy, Mr Olawale Edun, was constrained to issue a statement clarifying this, saying  “The pension industry, like most the financial industries, is highly regulated. There are rules. There are limitations about what pension money can be invested in, and what it cannot be invested in. The Federal Government has no intention whatsoever, to go beyond those limitations and go outside those bounds which are there to safeguard the pensions of workers. What was announced to the Federal Executive Council, was that there was an ongoing initiative drawing in all the major stakeholders in the long-term saving industry, those that handle funds that are available over a long period to see how, within the regulations and the laws, these funds could be used maximally to drive investment in key growth areas”. Nevertheless, in this Discourse, Bolu Ojewole, Kede Aihie, and Oluwadamilare Said  discuss the intricacies, risks, propriety or otherwise, if such a plan were to be real. Aside from the fact that the Pension Fund Administrators have clear guidelines on how they can invest, a substantial amount of pension funds are already invested with Government in Federal Government securities, pointing to the fact that it isn’t exactly as if N20 trillion is lying in the Banks idle

Legal and Regulatory Consideration of Proposed Investment of Pension Funds in Infrastructure Projects

Bolu Ojewole


Nigeria’s infrastructure deficit, is a significant hurdle to economic growth and development. The gap is estimated to be trillions of Dollars, encompassing power, transportation, water, and sanitation sectors. These projects often require significant financing and may generate significant cash flow, but, implementation could be fraught with risk and uncertainty. What is not in doubt is that the Government in Nigeria, both at national and sub-national levels, has not met the funding requirements for the country’s infrastructure needs. This lack of investment creates bottlenecks for businesses, hinders productivity, and reduces Nigerians’ overall quality of life. The current economic climate has created a severe gap, as reliance on Government budgetary allocation is inadequate due to competing priorities and limited resources.

 Against the backdrop, there have been calls within the Government and other policymakers, for the significant contributions held by Pension Fund Administrators to be deployed towards funding the infrastructure gap. These calls have become louder, in 2024. Recently, the Minister of Finance, Wale Edun, stated, “…. the Government will collaborate closely with private sector players to tap into the over N20 trillion pool of long-term funds available with Nigeria’s pension, life insurance and investment funds”. He added, “One of the key drivers of economic growth is investment in infrastructure, housing, power, rail, roads, water transport, even technology. These are key drivers of economic growth, they increase product when you invest in them, you get increased productivity, you get economic growth, and you get job creation, which reduces poverty”.

Evolution of the Nigerian Pension Industry

In order to dimension the possibilities and prospects, it is critical to highlight the evolution of the Nigerian Pension Industry from its pre-2004 and post-2004 years. In the years preceding the enactment of the Pension Reform Act 2004, Nigeria operated a pension scheme with a limited scope that was applied only to public sector employees. The scheme was also based on salary and years of service, significantly burdening public sector finances. Another critical issue was that, transferring their pension benefits was often difficult or impossible when employees switched jobs. However, since 2004, a private sector-led pension industry has emerged, with employers and employees contributing a fixed percentage to retirement savings accounts (RSA). The RSA is then managed by the Pension Fund Administrators (PFAs), in accordance with the governing law and under the supervision of the National Pension Commission (PenCom). The underlying principle behind the existing scheme, is increased transparency. RSA is linked to individual employees; when they change jobs, their details remain the same, and at retirement, employees are guaranteed lump sum and period payments, depending on the contributions and returns generated by the PFAs. The current pension regulatory framework, guarantees that employees will receive retirement payments.

 Infrastructure projects tend to be long-term endeavours, which align well with the long-term investment horizons of pension funds. Thus, a strong argument exists for deploying pension funds for these projects. In addition, there is a strong argument for investing pension funds in infrastructure projects, given the portfolio diversification and economic growth benefits.  

PFAs in Nigeria are currently allowed to invest an unlimited amount, in securities issued by the FGN or guaranteed by it. It is also true that most of the N20tr assets held by PFAs in Nigeria, are invested in FGN-issued treasury instruments and securities. Therefore, it can be argued that the FGN already has access to the pool of funds held by PFAs through instruments issued by the FGN and its agencies, including the “CBN” and the Debt Management Office.

One crucial question to consider, is whether the proposal for direct investment by PFAs in infrastructure projects is legal and appropriate. In order to address this, Rule 4 of the Regulation of Investment of Pension Funds Asset (the “Regulation”) will be referenced. The Regulation lists the asset classes where pension fund assets can be invested, and these are: (a) Federal Government Securities: PFAs can invest without limitation in bonds and other debt instruments issued by the Federal Government of Nigeria (FGN); (b) State Government Bonds: PFAs can invest in eligible bonds issued by State Governments, but with limitation of a maximum of 2% for any individual State Government bond; (c) Corporate Bonds: PFAs can invest in bonds issued by qualified companies, with restrictions based on credit ratings; (d) Sukuk: PFAs can invest in Shariah-compliant Sukuk issued by the FGN, State Governments provided total investment in Bonds and Sukuk combined cannot exceed 20% of pension assets; (e) Equities: PFAs can invest in ordinary shares of publicly listed companies on Nigerian stock exchanges with investment limits based on the company’s risk rating; (f) Real Estate Investment Trusts (REITs): PFAs can invest in listed REITs, offering exposure to the real estate market while maintaining some liquidity. Investment limits apply; (f) Infrastructure Funds: PFAs can invest in infrastructure funds, but, with limitations, these funds typically invest in long-term infrastructure projects that generate stable returns.

PFAs can only invest in an asset class or securities, permitted by the Regulation issued by PenCom. The limitations in place on PFAs by PenCom appear to be with the clear understanding that some certain assets may be too risky, and that only the FGN cannot be insolvent.

The language of the proposal by the Minister of Finance suggests that there may be a need for PenCom to issue further guidance or regulations, to include infrastructure projects in the list of acceptable asset classes, or perhaps, the statement is an indication of intention in order to gauge public perception or acceptance of the proposal. It is also important to reiterate that the current Regulation is quite expansive, and PFAs can also invest in securities issued by public companies and regulated entities in accordance with the rules of the Securities and Exchange Commission (SEC) or on platforms approved by the CBN. Also, in the Regulation, “infrastructure funds” is an asset class within which pension funds can be invested. Why has the FGN not adopted the approach of encouraging the set-up of infrastructure funds? Also, one must note that, if there is a need to issue a revised Regulation or guideline, it is clear that PenCom, as an agency of the FGN, will likely implement the directives of the FGN – however, investment in infrastructure projects.

 PenCom periodically reviews and updates investment regulations, to adapt to market conditions and ensure continued protection of pension funds. The ultimate goal of these regulations is to safeguard retirement savings for Nigerians, while enabling PFAs to generate good returns within acceptable risk parameters. PenCom has done a reasonably excellent job regulating PFAs, and continues to play a critical role in regulating how PFAs invest pension fund assets in Nigeria. PenCom, in determining which assets qualify for investment in pension funds, focuses on the safety of pension funds, ensuring investments are low-risk and offer a reasonable return; diversified investments across asset classes like government bonds, equities, real estate, and infrastructure funds to mitigate risk; and investments which align with the long-term investment horizon of pension funds, aiming for steady growth over time. Currently, there are limits on how much PFAs can invest in specific asset classes. For example, while PFAs can invest an unlimited amount in securities issued by the Federal Government of Nigeria (FGN), there is a 2% cap on any individual State Government Bond. PFAs can also invest in equities, based on companies’ risk ratings and in real estate. The failure of PenCom’s Regulation and oversight concerning the asset classes, could cause Nigeria’s pension industry to fail if the infrastructure projects fail to deliver on the returns or fail for other reasons.

 Infrastructure projects can be complex and carry inherent risks, such as construction delays, cost overruns, and changes in government policy. These risks could potentially erode pension fund returns. Also, infrastructure project investments are often illiquid, meaning they cannot be easily converted to cash. This could pose challenges for pension funds, if they can’t access funds quickly to meet their obligations. The decision of whether to invest pension funds in infrastructure, projects is complex. It requires careful consideration of the potential benefits and risks, and robust safeguards to protect retirement savings.


There are compelling arguments on both sides of the debate about whether pension funds should be invested in infrastructure projects, and it must be noted that, infrastructure projects cannot qualify as an asset class unless they are structured and designed in the form of securities in which funds can be invested, providing liquidity and possibly traded. It must also be determined and confirmed whether the FGN is prepared to guarantee the securities issued for qualifying infrastructure projects being undertaken, solely under the PPP structure or by private entities. It is doubtful that the FGN will provide this guarantee. It is unclear if PFAs will invest in debt instruments issued for infrastructure projects being undertaken solely by the private sector or under a public-private partnership structure; consequently, finding the right balance between risk and return is critical to ensuring a sustainable and successful investment strategy for PFAs, but, PenCom must remain a watchdog to ensure the collective assets and funds of millions of Nigerians are not frittered away.

 Finally, if the FGN is keen to mobilise funds in the direction of infrastructure projects, it must do so with a clear understanding that there is a need for there to be solid regulatory frameworks and transparent investment processes to mitigate risks, and ensure that pension funds are invested in only bankable, viable infrastructure projects with allocation limits for each PFA and clear revenue streams.

Bolu Ojewole, Lawyer, Public Policy  Expert, Lagos

FGN’s Alleged Plan to Borrow from Pension Funds Sparks Controversy 

Kede Aihie 

Two issues raised are appropriateness and legality. Any plan to use pension funds meant for retirees’ benefits to finance infrastructure projects, naturally sparks off a  debate about the Government’s priorities and potential risks to social welfare.

Appropriateness: A Question of Priorities

Using pension funds for infrastructure projects, raises questions about the Government’s priorities. Pension funds are meant to provide a safety net for retirees, ensuring their financial security and well-being. Diverting these funds to other purposes may compromise the Government’s commitment to social welfare and the trust of citizens who have contributed to these funds throughout their working lives.

Legality: Compliance With Regulations

The borrowing plan must also comply with the Pension Reform Act 2014 and PENCOM Regulations. These guidelines stipulate specific requirements for investing pension funds, and any deviation from these rules may have legal and ethical implications. It is essential to ensure that the Government’s plan adheres to these regulations, to maintain transparency and accountability.

Addressing the issues of appropriateness and legality is vital, to ensure that the Government’s actions are transparent, accountable, and prioritise the welfare of Nigerian citizens, including retirees who rely on their pension benefits. The responsible management of pension funds is crucial, and any plan to borrow from PENCOM must uphold the trust of citizens and comply with existing regulations.

PENCOM announced in September 2023, that the worth of pension fund net asset value stood at N17.35 trillion.

PENCOM has established guidelines for the management of pension funds in Nigeria, aimed at ensuring the prudent management of retirement savings and promoting the growth and development of the pension industry. These guidelines provide a framework for the investment, administration, and management of pension funds, and are mandatory for all stakeholders involved in the pension fund management process.

Investment Guidelines

Pension funds must be invested in approved asset classes, including:

– Federal Government securities

– State and Local Government bonds

– Corporate bonds

– Equity shares

– Real estate

– Infrastructure funds

Investment Limits

Pension funds must adhere to specific investment limits, including:

– Maximum of 25% in Federal    Government securities

– Maximum of 10% in State and Local Government bonds

– Maximum of 15% in corporate bonds

– Maximum of 20% in equity shares

– Maximum of 5% in real estate

– Maximum of 5% in infrastructure funds

Risk Management

Pension funds must be managed with a prudent risk management approach, including:

– Diversification of investments

– Regular monitoring and review of investments

– Use of risk management tools and techniques

Funding Requirements

Employers must contribute a minimum of 10% of employees’ emoluments to the pension fund, while employees must contribute a minimum of 8% of their emoluments.

Administration and Management

Pension funds must be administered and managed by licensed Pension Fund Administrators (PFAs) and Custodians.

Transparency and Disclosure

Pension funds must be managed with transparency and disclosure, including:

– Regular disclosure of investment returns and portfolio composition

– Annual audit and publication of financial statements

Compliance with Regulations

Pension funds must comply with all relevant regulations and guidelines issued by PENCOM, and other regulatory authorities.

The guidelines for the management of pension funds in Nigeria are designed to ensure the prudent management of retirement savings, protect the interests of contributors, and promote the growth and development of the pension industry. All stakeholders involved in the pension fund management process must comply with these guidelines to ensure the integrity and sustainability of the pension system in Nigeria.

The lack of transparency and accountability in Government, has led to a significant erosion of trust among citizens. It’s crucial for the Government to recognise this and explore alternative funding sources that do not compromise the financial security of citizens, particularly retirees who have worked hard to earn their pensions.

Indeed, the amount being sought (N20 trillion allegedly) is substantial, equivalent to the entire Nigerian budget. This underscores the need for a more comprehensive and sustainable approach to funding infrastructure development, one that does not rely on diverting funds meant for citizens’ benefits.

By exploring other funding options and prioritising transparency and accountability, the Government can begin to rebuild trust with citizens and demonstrate its commitment to responsible governance. This could include exploring public-private partnerships, international funding opportunities, and other innovative financing solutions that do not compromise the financial well-being of citizens.

Kede Aihie, Lawyer, Publisher of The Nigerian Magazine, London

Propriety and Legality Using Pension Funds for Infrastructure Development

Oluwadamiare Said

The allegation that the Federal Government of Nigeria (FGN) proposed to use pension funds to finance infrastructure projects, has recently sparked considerable debate, particularly where the proposal is evaluated against relevant legal framework, the implications for Pensioners and the broader economic, as well as the society in general.

The Pension Reform Act 2014 (PRA 2014) is the cornerstone of Nigeria’s pension system, providing the legal foundation for the administration and investment of pension funds. Section 85(1) of the PRA 2014 mandates that pension funds must be invested following guidelines issued by the National Pension Commission (PenCom), to ensure the security and profitability of the investments. This section underscores the necessity for strict adherence to regulatory standards, in managing pension funds.

Section 86(1) of the PRA 2014 tasks PenCom with establishing standards, rules, and guidelines for managing pension funds. This provision emphasises the role of regulatory oversight in safeguarding the funds. Section 87(1) of the PRA 2014 outlines the principles of investment of pension funds, stressing the importance of safety and the maintenance of fair returns on investments. This principle highlights the need for prudence in pension fund investments.

In view of the above, it is important to understand PenCom’s investment guidelines, as same are crucial in assessing the legality of the FG’s plan. These guidelines detail permissible investment options, and risk management strategies. The PenCom Amended Regulation on Investment of Pension Fund Assets 2019 specifies the asset classes and limits within which pension funds may be invested, including infrastructure projects, provided they meet stringent criteria regarding risk and return profiles (PenCom Regulation).

The above notwithstanding, in evaluating the propriety or otherwise of any Government’s plan to invest pension funds in infrastructure projects, there would be need to take into account the following considerations and the overall economic impact of the initiative:-

Fiduciary Duty: Pension fund administrators have a fiduciary duty to beneficiaries, requiring them to act in the best interests of Pensioners by prioritising the security and growth of retirement savings [PRA 2014, Section 87(1)].

Trust and Confidence: The pension system’s integrity, relies on the trust and confidence of contributors. Any plan that might jeopardise this trust could undermine the entire system, leading to broader economic repercussions.

Government Influence: The FG’s involvement in directing pension fund investments could create conflicts of interest, as the Government might be tempted to prioritise political or economic agenda over Pensioners’ financial security.

Risk Management: Infrastructure projects often carry substantial risks, such as project delays, cost overruns, and economic fluctuations. These risks could endanger the security of pension funds, making the plan potentially imprudent.

The legality of the FG’s alleged plan could therefore be assessed from the provisions of the PRA 2014, its guidelines and the FG’s adherence to these statutory provisions and regulatory guidelines. In this regard, it is important to consider the following:-

Compliance with PRA 2014: The plan must align with the investment principles outlined in the PRA 2014, ensuring the safety and fair return of investments. Non-compliance with these principles would negatively impact on the plan [PRA 2014, Section 87(1)].

Adherence to PenCom Guidelines: The plan must strictly follow PenCom’s investment guidelines. Any deviation from these guidelines could be challenged as ultra vires, or beyond the legal authority of the FG or pension fund administrators (PenCom Regulation).

The case of Union Bank of Nigeria v Edionseri (1988), established that fiduciaries must act in the best interests of beneficiaries. Applying this principle, any investment that unduly risks pension funds could be deemed a breach of fiduciary duty. Accordingly, NEPA v Edegbero (2002) highlighted the importance of adhering to statutory provisions in managing pension funds. Non-compliance with statutory guidelines, could result in legal challenges and liabilities.

The broader economic and social implications of using pension funds for infrastructure, must also be considered.

Infrastructure Development: Investing in infrastructure could stimulate economic growth, create jobs, and improve public services. This positive impact could justify the investment, if it aligns with the safety and return principles of pension fund investments (PenCom Regulation).

Financial Stability: Conversely, diverting pension funds into high-risk infrastructure projects could destabilise the pension system, potentially leading to financial losses for Pensioners.

Pensioner Security: The primary objective of pension funds, is to secure retirees’ financial futures. Any plan that compromises this objective could have severe social consequences, and is capable of eroding Pensioners’ quality of life.

Public Confidence: The perception of pension fund safety, is crucial. If the public believes their retirement savings are being used imprudently, it could lead to lack of confidence and trust in participating in the pension scheme, therefore, undermining its objectives and sustainability.


Though the FGN has clarified its statement, it must be reiterated that any plan to use pension funds for infrastructure development must be scrutinised for both its propriety and legality. While infrastructure development can have significant economic benefits, it must not compromise the fiduciary duty owed to Pensioners. Adherence to statutory provisions, regulatory guidelines, and fiduciary duty principles is paramount. Any deviation could lead to legal challenges, and undermine public confidence in the pension system and administration.

Oluwadamilare Said, Legal Practitioner, Jackson, Etti & Edu, Lagos

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