African Pension Funds Underutilize Domestic Investment Opportunities

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African pension funds have significantly underutilized their domestic investment capacity, with actual allocations to private equity and alternative assets falling far below regulatory ceilings. In Nigeria, pension funds held ₦31 trillion in assets while remaining well below the 15 percent private equity limit, while in Ghana, actual allocations to alternatives reached only 0.58 percent despite a 25 percent allowance. This trend persisted even as OECD data showed bilateral aid to sub-Saharan Africa fell by 26.3 percent in 2025, with further contractions projected for 2026. The Africa Finance Corporation reported that African institutional portfolios, totaling approximately $775 billion in pension and insurance assets, remained heavily concentrated in government debt rather than productive infrastructure or private enterprise.

Consequences

If the trend of investing in government debt continues, the continent's largest pools of patient capital will fail to address critical infrastructure needs, such as power purchase agreements or industrial development. Without targeted investments in expertise, such as pooled diligence vehicles and trustee training, pension funds will likely remain unable to transition away from low-risk government bonds toward more complex domestic production assets.

Sources

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