Over the past five years, Nigerian Pension Fund Administrators (PFAs) have significantly increased their stake in the real estate sector, with investments surging by an impressive N267.93 billion.
This marks a staggering growth rate of 52,004.85 percent, as their real estate portfolio skyrocketed from just N5.13 billion in 2020 to a remarkable N273.06 billion by the end of 2024. The figures, compiled by the Pension Fund Operators Association of Nigeria (PenOp), highlight a dramatic shift in investment strategies by PFAs.
Despite this unprecedented growth in direct real estate investments, the same period saw a sharp decline in Real Estate Investment Trusts (REITs), with investments plummeting by N219.22 billion. In 2020, investments in REITs stood at N239.28 billion but dropped drastically to N20.06 billion in 2024. Analysts attribute this decline to a shortage of REIT products in the capital market, pushing pension funds toward alternative investment channels, particularly private equity deals.
- According to PenOp, PFAs have historically participated in the real estate market through two main avenues: direct investments and Real Estate Investment Trusts. While active pension funds are prohibited from directly investing in real estate due to regulatory constraints, they utilize REITs as a way to channel their investments. REITs serve as regulated vehicles where investors pool resources to collectively invest in real estate assets, offering a structured and relatively secure method of participation in the property market.
However, the drop in REIT investments is a direct result of the limited availability of suitable products in the market. As a result, active pension funds are now exploring real estate investments through Private Equity Funds. These funds provide flexibility and opportunities for PFAs to indirectly finance real estate projects while navigating around the dearth of REIT options.
Closed Pension Funds (CPFAs), unlike their active counterparts, are not bound by the same investment restrictions and have invested nearly N300 billion directly in real estate by the close of 2024. This trend underscores the significance of real estate as a strategic asset class for Nigerian pension funds.
Industry experts emphasize the dual role of real estate investments in pension fund portfolios—they not only act as a hedge against long-term inflation but also provide developers with access to a reliable source of long-term capital. The evolving investment landscape highlights the adaptability of PFAs in navigating market limitations and leveraging opportunities to enhance returns for their contributors.
