Pension Funds Hold Trillions in African Assets Yet Shun Domestic Deals

Africa’s pension funds are sitting on a vast, largely untapped pool of capital, and the rules already let them deploy it. Nigeria’s pension regulator, PenCom, permits funds to hold up to 15 per cent of assets in private equity; industry assets exceed 31 trillion naira. Ghana’s regulator allows up to 25 per cent in private funds. Actual allocations to alternatives in Ghana sit at 0.58 per cent. The gap between what is permitted and what is practiced is the central problem, and raising regulatory ceilings will not close it.

The standard reform argument has focused on loosening restrictions. Policymakers and analysts have repeatedly called for higher allocation ceilings on domestic institutional capital. The evidence points elsewhere. PenCom, examining the question directly, cited a supply-side shortage of qualifying, investable funds. But the broader continental pattern reveals something deeper: the friction is not the availability of investment opportunities. It is the appetite for them.

Additional reference context is available at https://africanarguments.org/2026/08/africas-pension-funds-are-already-allowed-to-invest-at-home-they-dont/.

That distinction has become urgent. In April 2025, the OECD released preliminary figures showing aid from the world’s wealthiest donors had fallen 23.1 per cent to 174.3 billion dollars, the steepest single-year contraction on record and the second consecutive annual decline. Bilateral aid to sub-Saharan Africa fell 26.3 per cent. The OECD’s June projections report forecasts a further 11.6 per cent drop in bilateral aid to sub-Saharan Africa in 2026, with health financing potentially falling as much as 63 per cent below its 2022 peak. The contraction has renewed focus on mobilising domestic savings.

Remittances offer only partial relief. Africans abroad sent roughly 124 billion dollars home in 2025, about twice what the continent received in official development assistance. Remittances and aid, though, perform different economic functions. Remittances are household transfers that pay school fees, clinic bills, rent and funeral costs. They do not build a district hospital, capitalise a fertiliser plant, or underwrite a twenty-year power purchase agreement. The capital that could do those things is institutional and already domestic.

African pension funds and insurers hold around 775 billion dollars in assets, according to the Africa Finance Corporation’s State of Africa’s Infrastructure Report 2025, of which 455 billion dollars is in pensions and 320 billion dollars in insurance. Add sovereign wealth funds and the figure reaches 2.1 trillion dollars, according to the African Development Bank’s Solomon Quaynor. In some countries, nearly 70 to 80 per cent of institutional portfolios sit in government debt. Africa’s largest pool of patient capital is mostly lending to African governments to cover recurrent spending and service existing obligations.

The obstacle is not permission but capability. Most African pension funds lack in-house teams able to price infrastructure risk, run diligence on an unlisted company, or negotiate with experienced fund managers, as the OECD notes. A trustee board that cannot evaluate a toll-road concession is not being cautious when it declines one. It is being accurate about its own capacity. That gap can be addressed through pooled diligence vehicles that let several funds share the cost of expertise none can afford alone, first-loss tranches that make unfamiliar asset classes survivable on a first attempt, and trustee training that regulators actually fund. None of it is a policy announcement. All of it is a line item in a budget.

The second barrier cuts deeper: incentive structure. Treasury bills pay well, settle predictably, and have never cost a trustee their job. An underperforming government bond is a market condition. An underperforming private placement is a decision with a name attached to it. Until that asymmetry is addressed directly, through how trustees are appointed, indemnified and assessed, raising the ceiling simply widens a door nobody is walking through.

Meanwhile, when African institutional money does reach private markets, a further loss occurs that rarely appears in allocation statistics. The receiving vehicle is often domiciled in Mauritius, Luxembourg or Delaware. Fees, legal work, fund administration and professional expertise accumulate offshore, and the domestic industry that would eventually supply the missing capability never quite takes root. The sharper cost is denomination. A Ghanaian manufacturer earning cedis but funded in dollars is running an unhedged currency bet alongside its actual business. When the currency moves, an otherwise sound company becomes a distressed one.

Ghana’s venture capital association launched a 5 per cent Pension and Insurance Compact in April 2025, a voluntary industry commitment, alongside a 70 million dollar locally managed fund of funds. A subsequent government mandate directed pension and insurance funds to meet that 5 per cent allocation, precisely to test whether local-currency, locally domiciled capital can close the gap. It is small. It is also one of the few live experiments worth watching, because it treats domicile and denomination as design choices rather than accidents.

The fundamental obstacle runs deeper than any technical fix can reach. Pension assets are workers’ deferred wages, held under fiduciary duty, and African trustees have recent and specific reason for caution. When Ghana launched its domestic debt exchange in December 2022, pension funds fell inside the perimeter. They were exempted only after labour unions threatened to strike. The exemption held through the February 2023 exchange, though in August 2023 the finance ministry completed a separate swap of 95 per cent of local debt held by pension funds. When the programme reopened in September 2023, pension funds were again explicitly excluded. Bondholders who did participate faced coupon terms that some analysts valued as losses of 60 to 70 per cent.

That episode explains the unused headroom better than any regulatory audit could. It also reveals why the conventional sequencing is backwards. The usual programme runs: liberalise allocation rules, build capability, mobilise domestic savings, finance development. The order has to be reversed. Governments that want access to domestic long-term savings must first accept binding limits on their own claims to it, through statutory protection of pension assets in any future restructuring, and an end to using captive institutional demand as a substitute for fiscal discipline.

Domestic capital mobilisation is not a technocratic programme. It is a bargain, and the state has to move first. Two numbers tracked to 2030 would settle the question: the share of African institutional assets held in productive non-government assets, and the share of Africa-focused funds domiciled and denominated on the continent. A third would test whether the bargain is real: how many jurisdictions have placed pension assets beyond the reach of a domestic debt exchange by statute rather than by negotiation. The third requires a government to accept a constraint on itself in advance of a crisis, which is the hardest thing any government does, and the only thing that would make the other two move.