By Joshua Worlasi AMLANU
[email protected] / [email protected]
As the domestic pension funds swell beyond GH¢100 billion, the debate is deepening about whether these vast sums should continue flowing primarily into government bonds — which were traditional considered practically risk-free prior to the Domestic Debt Exchange Market (DDEP) — or can they be channeled into infrastructure, private equity, and other productive investments capable of accelerating national development?
For decades, pension managers have sought refuge in the relative safety of government paper. But critics argue this represents a missed opportunity to tackle Ghana’s urgent infrastructure needs and stimulate genuine economic transformation.
At a time when fiscal consolidation continues to dominate the country’s macroeconomic strategy, the idea of pension capital as a catalyst for infrastructure development and long-term economic transformation is gaining traction among policymakers, Trustees and fund managers.
Pension funds under management totaled GH¢78.2 billion, as of June 2024. According to figures from the Pensions Digest, 78.34 percent of these assets were allocated to Government of Ghana (GoG) securities, including treasury bills and bonds. When bank securities and other money market instruments are included, the figure rises above 90 percent.
This overwhelming preference for public debt instruments is no accident. Years of policy direction and risk aversion have steered pension fund managers toward what is seen as the safest—and often, the most liquid—investment class. But safety has come at a cost.
With inflation standing at 22.4 percent in March 2025 and treasury yields ranging between 15.32 percent and 18.37 percent, many pension schemes are posting negative real returns. Moreover, overexposure to a single issuer—the government—has created systemic vulnerabilities, particularly in light of the 2022 domestic debt restructuring and ongoing fiscal recovery efforts.
“The current system is heavily skewed toward government securities,” says Dela Agbo, CEO of EcoCapital Investment Management. “It’s a risky strategy, especially when the government is still emerging from a fiscal crisis. Pension funds should be taking a bit more risk—allocating to equities and alternative assets that can deliver better returns and contribute to national development.”
The regulatory environment has begun to shift in response. In 2023, the National Pensions Regulatory Authority (NPRA) revised its investment guidelines, raising the ceiling for alternative investments to 25 percent.
In theory, this move could unlock over GH¢25 billion in funding for infrastructure, private equity, and real estate by the end of 2025. In practice, progress has been slow.
The Macroeconomic Drag
One of the key constraints, fund managers say, is macroeconomic uncertainty. High inflation, elevated interest rates, and currency volatility have all made long-term, illiquid investments less attractive. For assets like private equity and infrastructure to become viable, Ghana’s broader investment climate must stabilize.
“The incentive to do alternatives is currently very low,” says Kwabena Boamah, Managing Director of Stanbic Investment Management Services. “The macroeconomic indicators do not make a compelling case for private equity. These are companies you are investing in, and if they’re operating in an environment of high inflation and high borrowing costs, it becomes very difficult for them to deliver the kinds of returns that justify the risk.”
Mr. Boamah, however, sees the bigger opportunity lying in diversification and impact. SMEs, which contribute between 60 percent and 70 percent of Ghana’s GDP and employ over 80 percent of the workforce, remain critically underfunded. Bridging that gap, he argues, will require the kinds of hands-on capital that private equity firms can provide—and which pension funds can enable.
“If we had pension funds funding private equity funds that are investing in SMEs, then that means they are supporting the transition of SMEs into more productive enterprises,” he explains. “That’s where the developmental dividend lies—more jobs, more taxes, and a more resilient economy.”
PPPs and the Infrastructure Imperative
Another area ripe for pension investment is infrastructure. Ghana, like many developing nations, suffers from an acute infrastructure deficit: roads, power, water systems, housing, and digital infrastructure all lag behind demand.
The Public-Private Partnership Act of 2020 (Act 1039) offers a legal framework to facilitate private sector involvement in infrastructure delivery—but uptake has been modest.
During the presentation of the 2025 Budget, Finance Minister Dr. Cassiel Ato Forson reiterated government’s ambition to leverage pension fund capital through PPPs. “PPPs can unlock massive infrastructure financing,” he said. “By leveraging private sector expertise and pension fund resources, we can accelerate the delivery of critical projects while ensuring long-term financial sustainability.”
Mr. Boamah agrees, noting that tools such as infrastructure funds and Real Estate Investment Trusts (REITs) can act as vehicles for channelling long-term pension capital into roads, commercial properties and housing—especially under a regulated environment that protects contributors’ savings.
“These are classified under alternative investments,” he says. “With the right safety nets, infrastructure projects like roads can be funded by pension-backed syndicates. You put up the structure, use tolls to pay off the interest and principal over time.”
While Ghana does not yet have a “classic” example of pension funds leading a major infrastructure rollout, Mr. Boamah reveals that a pipeline project is already underway in the Western Region, where pension assets are being deployed as part of a broader syndicate to develop port-adjacent infrastructure in Takoradi. If successful, it could serve as a template for similar partnerships across the country.
Regulatory Nudges—or Mandates?
Still, changing the status quo will likely require more than regulatory permissions. For many in the industry, a stronger compliance mechanism may be needed to push pension funds toward alternative investments.
“Today, the 25 percent allocation to alternatives is a cap, not a mandate,” Mr.Boamah notes. “What we’re proposing is that it should be treated as a compliance issue.
Every fund manager, every trustee should be required to show that they have made meaningful allocations to alternatives over a defined period.”
He advocates for a minimum allocation—measured over time, not as a one-off—to allow managers the space for due diligence, manager selection, and risk assessments. This staggered approach, he says, would foster quality investments rather than box-ticking.
“There should be a conscious and intentional effort to push allocation away from overexposure to government,” Mr. Boamah adds. “Not just to satisfy regulation, but to achieve impact.”
One of the most stubborn obstacles to diversification is psychological. Government instruments offer predictability, political backing, and liquidity—all traits that fund managers and trustees value highly in a volatile economy.
Moreover, in the event of a default, government liabilities carry the implicit assurance of eventual repayment—something not guaranteed in private markets.
But the argument for change is growing louder. Real returns on GoG bonds have been negative for much of the past three years.
The 2022 domestic debt exchange programme, which wiped out billions in expected interest payments and extended maturities, sent a clear warning that even “safe” assets carry hidden risks. Meanwhile, pension obligations continue to rise alongside Ghana’s aging population.
For younger contributors especially, the case for better performance and long-term value creation is compelling.
Some market analysts put it bluntly stating that diversification isn’t just about chasing higher returns; it should be about managing risk and ensuring liquidity over time. A well-structured portfolio essentially should reflect both the safety of traditional assets and the growth potential of alternatives.
Internationally, models exist for how pension funds can drive national development. In Canada, the Caisse de dépôt et placement du Québec (CDPQ) has invested heavily in infrastructure, both domestically and globally.
In Kenya, pension funds have financed affordable housing schemes through REIT structures. Even Nigeria’s pension reforms, while nascent, are opening avenues for private equity and infrastructure-backed bonds.
For Ghana, the policy space is there. The capital is there. The legal framework is taking shape. What remains is execution—and a collective will.
The Next Frontier
Given that the country grapples with a modest post-IMF economic recovery and seeks to reorient its growth strategy away from public debt and commodity dependence, pension funds represent both a challenge and an opportunity.
On the one hand, they are a symbol of Ghana’s risk-averse financial culture—anchored in decades of macroeconomic instability. On the other, they offer a pool of long-term, patient capital that, if unlocked, could impact the country’s developmental ageAnda.
“There’s no shortage of need,” says Mr. Agbo. “What we need is bold leadership, stronger governance structures, and a shift in mindset. Ghana’s pension capital can do more than earn interest. It can build roads, empower entrepreneurs, and drive transformation.”
The question is whether the system will take the leap.
