Credit, Liquidity Risks Curtail Deployment of N22.8 Trillion Pension Capital for Infrastructure
Despite Nigeria possessing one of Africa’s most substantial institutional capital reserves, the effective utilization of its N22.8 trillion in pension assets is stymied by credit and liquidity risks, as detailed in the latest State of Africa’s Infrastructure (SAI) Report by the Africa Finance Corporation (AFC).
The report elucidates that although Nigeria’s pension system has accumulated considerable funds under management as of January 2025, structural impediments hinder these assets from being fully harnessed for long-term infrastructure development.
“As of early 2025, Nigeria’s pension assets under management surpassed N22.8 trillion (approximately US$14.2 billion), rendering it one of the continent’s largest institutional capital reserves.
Nevertheless, the effective channeling of this capital into long-term infrastructure has been constrained by credit and liquidity risks,” the report asserts.
Acknowledging these limitations, Nigeria established InfraCredit in 2017, a public-private guarantee institution intended to bolster infrastructure financing.
This initiative was inaugurated with the support of the Nigeria Sovereign Investment Authority (NSIA), GuarantCo, Africa Finance Corporation (AFC), and other strategic allies.
According to the report, InfraCredit plays an indispensable role in furnishing local currency guarantees for corporate infrastructure bonds, enabling them to attain investment-grade ratings that conform to pension fund requirements under prevailing regulatory frameworks.
Since its inception, InfraCredit has catalyzed local currency bond issuances for diverse infrastructure projects, encompassing renewable energy, gas distribution, logistics, and industrial development.
By enhancing creditworthiness and mitigating investor risk perception, InfraCredit has effectively bridged the chasm between pension capital and infrastructure financing in a challenging investment milieu.
The outcomes of InfraCredit’s intervention have been remarkable. The allocation of Nigerian pension funds to infrastructure has soared dramatically, from N1.2 billion (0.02% of total assets under management) to over N242 billion (1% of total AUM), equivalent to approximately $155 million.
This significant surge in infrastructure-focused pension investments underscores the catalytic potential of targeted credit enhancement strategies, empowering institutional investors to engage in long-term economic development.
The report proposes that Nigeria’s approach offers a complementary model for mobilizing pension capital toward infrastructure investments, without imposing direct allocation mandates. Instead, market-driven de-risking mechanisms, such as InfraCredit, present a sustainable avenue to unlock long-term institutional investments for critical development initiatives.
As Nigeria continues to refine its financial frameworks, further regulatory enhancements and risk mitigation strategies could augment pension fund participation, fortifying Africa’s capacity to finance its own growth through local investment mechanisms.
