Year-to date, domestic institutional investors have accounted for 60.0% of transactions on the NGX Exchange (2021: 46.7%). Nigerian pension funds are the largest part of this group, with total Assets Under Management of N14.36trn as of July 2022. However, data from the pension industry regulator shows that Nigerian pension funds’ domestic equity exposure fell to 6.4% in July 2022, the lowest since November 2020, from a 15-month high of 7.1% at the end of April. With what looks like pension funds choosing to invest inflows outside the stock market, what could this mean for equity returns going forwards?

First, we looked back at pension funds’ historical exposure to domestic equities and found that Nigerian pension funds have essentially halved their equity exposure today, from 11.9% levels at the end of 2013. This is understandable given equities have returned a measly 5.0% annually in the period, compared to average inflation of over 13.0%.

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