The National Pension Commission has raised the investment limits for ordinary shares across RSA Funds I, II, III and VI-Active, a step that could unlock nearly N1tn in potential inflows into Nigeria’s equities market, according to a new thematic report by CardinalStone Research.

The report noted that the regulator said the move was aimed at addressing implementation challenges linked to the Revised Regulation on Investment of Pension Fund Assets issued in September 2025, particularly constraints involving limits on ordinary shares, FGN bonds, and alternative assets.

A shortage of eligible instruments has limited pension funds’ ability to invest in the alternative asset class, leaving the allocation cap largely underutilised and pension fund administrators with excess liquidity.

It was earlier reported that the National Pension Commission adjusted the investment limits for ordinary shares across the funds. Fund I’s cap was raised to 35 per cent from 30 per cent, while Fund II’s increased to 33 per cent from 25 per cent.

Fund III’s limit was lifted to 15 per cent from 10 per cent, and the RSA Fund VI Active allocation was raised by eight percentage points to 33 per cent from 25 per cent.

In support of the regulator’s move, analysts at CardinalStone Research noted that industry data indicated Fund II was nearing the previous 25.0 per cent threshold, while Fund III had already surpassed it.

“Instructively, the positions do not account for the 6.3 per cent and 5.2 per cent market gains in January 2026 and February 2026 that may have further driven PFAs closer to some limits or even above, amidst pressure on bandwidth for proper portfolio decision-making,” the report stated.

To gauge the possible impact, CardinalStone assumed the pension industry’s net asset value would continue growing at the 21.9 per cent rate recorded in 2025.

Based on projected 2026 assets under management and varying assumptions about how much of the additional headroom pension fund administrators utilise, the report presented three scenarios.

In its base-case scenario, assuming fund managers utilise 50 per cent of the newly available headroom, CardinalStone Research projects that roughly N989.51bn could be directed into equities. A more cautious 30 per cent utilisation would translate to N593.71bn in inflows, while an 80 per cent deployment scenario could drive potential flows as high as N1.58tn.

“Whatever the outcome, the decision appears to be a good catalyst for an equities market that is already on a bright path. PFAs are also likely to leverage the rule to properly optimise their positions in fundamentally sound tickers, with their sell orders, previously hindering the take-off of these stocks, now expected to give way to buy orders and sustain the bullish momentum.

“The decision also combines with valuation attractiveness, growth expectations, a stable FX market, and moderating inflation to improve the case for Nigerian equities in 2026,” read part of the report.

If achieved, these projected inflows would provide a major boost of domestic institutional liquidity, making pension funds a central influence on equity market performance this year.

Another investment firm, Comercio Partners also contended that the substantial allocation of pension assets to government securities has supported public deficits at the cost of private-sector expansion, while exposing contributors to persistent inflation risks.

It stated, “The revised equity limits, though modest by global standards, represent a pragmatic recalibration that aligns pension capital more closely with Nigeria’s structural development priorities. The policy is expected to channel long-term domestic savings into corporate investment, supporting expansion, working capital, and innovation, areas that have historically been underfunded relative to government borrowing.

“By redirecting capital from government bonds to equities, pressure on sovereign borrowing could moderate, potentially lowering yields and easing fiscal strain in an environment of elevated deficits.

“Expanding pension exposure to equities also improves expected retirement outcomes, as equities have historically delivered superior multi-year real returns in Nigeria, enhancing future consumption capacity and strengthening resilience against inflationary shocks. Greater participation in the equity market is likely to increase liquidity and turnover, improve price discovery, reduce volatility for listed companies, and encourage new listings, including mid-cap and growth-oriented firms that previously struggled to access patient capital.”