High Interest Rates Spur 17.7% Surge in Fixed Income Investments to ₦2.4 Trillion — PenCom Report
Nigeria’s fixed income investment market continues to attract growing attention, with total investments surging by 17.7% year-on-year to reach ₦2.405 trillion as of August 2025, up from ₦2.043 trillion in the same period of 2024.
This development was revealed in the latest Pension Funds Industry Portfolio Report by the National Pension Commission (PenCom), which tracks how pension assets are allocated across different investment instruments in the country.
Rising Interest Rates Fuel Investment Growth
The impressive rise in fixed income investments was largely attributed to Nigeria’s high interest rate environment, driven by the Central Bank of Nigeria (CBN) through its sustained Monetary Policy Rate (MPR) tightening.
Over the past two years, the CBN had steadily increased the MPR — the benchmark interest rate for loans, deposits, and government securities — reaching 27.5% before a slight cut to 27% last month.
Market operators explained that this elevated rate regime made fixed income and money market instruments such as fixed deposits, commercial papers, and bank acceptances more attractive to investors seeking stable returns with lower risk exposure.
Breakdown of the Fixed Income Landscape
According to PenCom’s report:
• Fixed income securities accounted for 77.8% of total money market investments, valued at ₦2.405 trillion.
• Commercial papers followed, with ₦226 billion, representing 9.4% of total market value.
• Foreign money market instruments ranked third, with ₦102 billion, or 4.2% of total investment value.
Overall, money market securities contributed 9.28% to Nigeria’s total ₦25.895 trillion pension fund assets.
Balancing Inflation and Growth
The slight MPR reduction by the CBN was aimed at supporting economic growth while maintaining control over inflation, which has remained persistently high despite recent disinflationary trends.
Analysts believe that the balance between inflation management and investment attractiveness is key to sustaining growth in the fixed income space.
Expert Insight: Why PFAs Are Increasing Exposure
Commenting on the trend, David Adonri, Vice Chairman and Analyst at Highcap Securities, explained that Pension Fund Administrators (PFAs) are strategically increasing their holdings in fixed income instruments due to their safety and attractive yields.
“Investments in money market securities by PFAs are necessary because of the high interest rate and the relatively low risk attached,” he said.
“However, diversification remains crucial. PFAs must balance fixed income exposure with other asset classes to enhance overall portfolio returns.”
Outlook: Stability Over Speculation
With inflation still elevated and economic uncertainties lingering, analysts expect continued preference for fixed income securities in the short to medium term.
As long as interest rates remain high, investors — especially institutional players like PFAs — are likely to favor secure, income-generating assets over riskier alternatives such as equities.
In Summary
Nigeria’s ₦2.4 trillion fixed income market is growing fast, driven by a tight monetary policy, strong investor appetite for safety, and steady yields. While the environment offers attractive returns for now, experts emphasize that long-term portfolio health depends on maintaining the right balance between security and diversification.
High rates, high confidence — Nigeria’s fixed income market remains a safe haven amid economic volatility.
Nigeria’s fixed income investment market continues to attract growing attention, with total investments surging by 17.7% year-on-year to reach ₦2.405 trillion as of August 2025, up from ₦2.043 trillion in the same period of 2024.
This development was revealed in the latest Pension Funds Industry Portfolio Report by the National Pension Commission (PenCom), which tracks how pension assets are allocated across different investment instruments in the country.
Rising Interest Rates Fuel Investment Growth
The impressive rise in fixed income investments was largely attributed to Nigeria’s high interest rate environment, driven by the Central Bank of Nigeria (CBN) through its sustained Monetary Policy Rate (MPR) tightening.
Over the past two years, the CBN had steadily increased the MPR — the benchmark interest rate for loans, deposits, and government securities — reaching 27.5% before a slight cut to 27% last month.
Market operators explained that this elevated rate regime made fixed income and money market instruments such as fixed deposits, commercial papers, and bank acceptances more attractive to investors seeking stable returns with lower risk exposure.
Breakdown of the Fixed Income Landscape
According to PenCom’s report:
• Fixed income securities accounted for 77.8% of total money market investments, valued at ₦2.405 trillion.
• Commercial papers followed, with ₦226 billion, representing 9.4% of total market value.
• Foreign money market instruments ranked third, with ₦102 billion, or 4.2% of total investment value.
Overall, money market securities contributed 9.28% to Nigeria’s total ₦25.895 trillion pension fund assets.
Balancing Inflation and Growth
The slight MPR reduction by the CBN was aimed at supporting economic growth while maintaining control over inflation, which has remained persistently high despite recent disinflationary trends.
Analysts believe that the balance between inflation management and investment attractiveness is key to sustaining growth in the fixed income space.
Expert Insight: Why PFAs Are Increasing Exposure
Commenting on the trend, David Adonri, Vice Chairman and Analyst at Highcap Securities, explained that Pension Fund Administrators (PFAs) are strategically increasing their holdings in fixed income instruments due to their safety and attractive yields.
“Investments in money market securities by PFAs are necessary because of the high interest rate and the relatively low risk attached,” he said.
“However, diversification remains crucial. PFAs must balance fixed income exposure with other asset classes to enhance overall portfolio returns.”
Outlook: Stability Over Speculation
With inflation still elevated and economic uncertainties lingering, analysts expect continued preference for fixed income securities in the short to medium term.
As long as interest rates remain high, investors — especially institutional players like PFAs — are likely to favor secure, income-generating assets over riskier alternatives such as equities.
In Summary
Nigeria’s ₦2.4 trillion fixed income market is growing fast, driven by a tight monetary policy, strong investor appetite for safety, and steady yields. While the environment offers attractive returns for now, experts emphasize that long-term portfolio health depends on maintaining the right balance between security and diversification.
High rates, high confidence — Nigeria’s fixed income market remains a safe haven amid economic volatility.