Nigeria's pension fund regulator wants to diversify investments with more focus on infrastructure and private equity, a spokesperson said on Friday, a move that could unlock a major new source of capital in Africa's most populous nation.

The voluntary and privately managed Retirement Savings Account held assets of 23.26 trillion naira ($14.58 billion) as of February, with 60% of that invested in government debt and less than 10% in corporate securities.

Diversification would allow the fund to seek out higher-yield investments, National Pension Commission (PenCom) spokesperson Ibrahim Buwai told Reuters.

"The current investment strategy can be improved, especially given the issue of inflation. It's safer to have more options in the mix that guarantee real returns," he said.

He added that PenCom was seeking out commercially viable infrastructure investments rather than subsidised projects such as public housing.

The potential investment pivot comes as Nigeria - Africa's biggest oil producer - faces a significant infrastructure deficit, projected by ratings agency Augusto & Co. to reach $878 billion by 2040.

With only 30% of Nigeria's estimated 200,000 km (124,274 miles) of roads paved, the deficit, which extends to bridges, schools, and other public utilities, is a brake on economic growth and development.

In order to diversify investments and put pension resources to work to remedy the problem, however, fund managers say stringent rules for acceptable investable instruments must first be loosened.

In its December mandate, for example, PenCom restricted investment to companies with a corporate rating of A, which are typically multinationals with limited commercial paper issuance.

Pension fund administrators considering B-rated companies, meanwhile, were required to provide additional guarantees.

Buwai said PenCom was pushing for the creation of new investment vehicles that would allow for diversification and improve returns while ensuring acceptable risk levels.

"We are working with the capital market operators to enlarge the scope of qualified financial instruments available for pension fund investments," he said.

($1 = 1,594.9000 naira)

Reuters