N277bn capital gap threatens shake-up in pension industry as PenCom recapitalisation bites

Nigeria’s pension industry is staring at a major funding challenge, with analysts estimating that operators will need about N276.8bn in fresh capital to comply with new minimum capital requirements introduced by the National Pension Commission (PenCom).

According to Coronation’s Year in Review and 2026 Outlook on Nigeria, only three Pension Fund Administrators (PFAs) – Stanbic IBTC Pension, Access ARM Pensions and Leadway Pensure – were comfortably capitalised above the new N20bn threshold before the policy was announced, highlighting the depth of the recapitalisation hurdle across the sector.

Under PenCom’s Pension Revolution 2.0 framework unveiled in September, the minimum capital for PFAs was raised to N20bn, while Pension Fund Custodians must now hold at least N25bn. PFAs are categorised based on assets under management (AUM): Category A covers PFAs with over N500bn in AUM and requires N20bn plus one per cent of assets above that threshold; Category B applies to PFAs with less than N500bn in AUM and a flat N20bn capital base; while Category C covers special-purpose PFAs.

Specialised operators face higher thresholds. NPF Pensions Limited must maintain N30bn in capital, while Nigerian University Pension Management Company Limited is required to hold N20bn.

Although the original deadline for compliance was December 2026, PenCom has extended the timeline to June 2027. The commission’s Director-General, Omolola Oloworaran, announced the six-month extension at the 2025 PenCom Media Conference, giving operators more time to shore up their balance sheets.

To meet the new requirements, PFAs are expected to rely on retained earnings, capital injections from shareholders, rights issues or private placements, and, increasingly, mergers and acquisitions.

Coronation analysts said the recapitalisation would affect nearly all operators. “Virtually every PFA will need to raise additional equity over the next 15 months,” the report noted. “Industry data suggest that PFAs collectively require about N276.8bn in new capital to meet the revised thresholds.”

The size of the shortfalls varies widely. Stanbic IBTC Pension Managers, which manages about N5.9tn in assets and has shareholders’ funds of N45.4bn, would require roughly N73.9bn in total capital, leaving a gap of about N28.5bn. Access ARM Pensions, with N3.5tn in AUM and shareholders’ funds of N22.8bn, faces a capital shortfall of between N27bn and N28bn. Leadway Pensure, managing about N1.8tn in AUM, would need around N33.1bn in minimum capital and may have to raise an additional N25.5bn.

Mid-tier PFAs are also under pressure. NPF Pensions, Premium Pensions, Trustfund Pensions and FCMB Pensions – with AUM ranging from N0.5tn to N1.23tn – would need to raise between N4.9bn and N22.6bn each to comply with the new rules.

Analysts expect the recapitalisation drive to trigger consolidation across the industry, similar to the banking sector reforms of the mid-2000s. Coronation cited the October 2025 sale of Verod Capital’s majority stake in Tangerine APT Pensions as an early example of restructuring driven by PenCom’s new capital mandate.

“Smaller PFAs that cannot raise N20bn or more may choose to merge with, or be acquired by, stronger players,” the report said, adding that more deals are likely as the compliance deadline draws closer.

While PFAs backed by large banking or insurance groups may be better placed to meet the new requirements, analysts cautioned that even these institutions face competing capital demands from their core businesses.

Looking ahead, Coronation expects a reduction in the number of PFAs by late 2026, alongside increased activity in the capital markets as operators seek funding. “By Q4 2026, the industry could be left with fewer but better-capitalised administrators, potentially improving stability if the transition is well managed,” the analysts said.

The recapitalisation is also expected to influence investment strategy. Analysts anticipate that PFAs will begin allocating small amounts to gold-backed exchange-traded funds and commodities in 2026, while foreign-currency pension funds for Nigerians in the diaspora could also emerge.

Meristem Securities, in its 2026 outlook, projected continued growth in pension investment in infrastructure, noting that pension exposure to infrastructure funds rose by 49.4 per cent year-on-year to N242.8bn in the first half of 2025.

“Infrastructure assets provide diversification benefits, inflation protection and resilience during market volatility,” Meristem said, adding that rising pension allocations reflect growing confidence in long-term, real-sector investments.