PenCom Broadens Investment Window for PFAs Amid Limited Domestic Options, Operational Constraints
. Grants two-year regulatory forbearance to boost pension fund returns
Ndubuisi Francis and James Emejo in Abuja
The National Pension Commission (PenCom) has extended its regulatory forbearance, allowing Pension Fund Administrators (PFAs) to invest pension assets in a broader range of securities issued by the parent companies of their respective Pension Fund Custodians (PFCs).
Specifically, PenCom announced a 24-month extension of its regulatory forbearance to allow PFAs to invest in a broader range of securities issued by the parent companies or HoldCos of their respective PFCs.
PenCom said the extension reflected prevailing market realities, including operational constraints and the limited availability of quality investable instruments in the domestic market.
The move was aimed at expanding investment opportunities while maintaining stringent safeguards to protect contributors’ funds.
The commission, in a circular dated July 3, 2026, and signed by its Director, Surveillance Department, AM Saleem, which was addressed to licensed Pension Fund Operators (PFOs), further stated that the temporary regulatory relief would remain in force for 24 months.
According to the commission, widening the eligible investment universe would provide PFAs with greater portfolio flexibility, improve diversification and enhance their ability to generate optimal risk-adjusted returns in line with their fiduciary responsibilities to Retirement Savings Account (RSA) holders.
However, PenCom stressed that the extension of the forbearance did not constitute a relaxation of investment discipline, insisting that every investment involving custodian-related entities must meet the same fiduciary standards applicable to all pension investments.
It emphasised that the mere relationship between a security issuer and a pension fund custodian must never confer preferential treatment.
The commission further directed that all transactions must be conducted strictly on an arm’s-length basis and on prevailing market terms, warning that governance safeguards alone cannot eliminate correlation and contagion risks.
Consequently, it maintained quantitative prudential limits on such investments to prevent excessive concentration of pension assets.
Under the new framework, PFAs may invest only in equities and financial instruments issued by the holding companies of their custodians, provided such parent companies were licensed financial institutions regulated by the Central Bank of Nigeria (CBN), publicly quoted on a Securities and Exchange Commission (SEC)-recognised securities exchange and possessed a proven record of financial soundness.
The companies must also demonstrate sustained profitability, a history of dividend payments, regulatory compliance, and have no unresolved enforcement actions.
To further mitigate risks, PenCom introduced detailed exposure limits across RSA fund categories.
For ordinary shares, investments in parent companies were capped at one per cent for Funds I, II, V-Growth and VI-Active, while Funds III, IV, V-Conservative and VI-Retiree may invest up to three per cent.
For bonds, exposure was limited to three per cent for Funds I, II, V-Growth, and VI-Active, and to five per cent for Funds III, IV, V-Conservative, and VI-Retiree.
In addition, the commission ruled that the combined exposure of an RSA fund to equities and bonds issued by the parent company of a PFC must not exceed five per cent of the portfolio’s consolidated net asset value (NAV).
Overall exposure to all securities issued by the custodian’s parent company, including money market instruments, must not exceed 10 per cent of the portfolio’s consolidated NAV.
PenCom also imposed restrictions on participation in corporate bond issues involving custodian parent companies.
Accordingly, no PFA may subscribe to more than 20 per cent of any bond issue rated “A” or above, while participation in bonds rated “BBB” was capped at 15 per cent.
The commission noted that these thresholds would operate alongside the broader limits contained in the Regulation on Investment of Pension Fund Assets.
Also, recognising the heightened fiduciary sensitivity associated with investments involving related parties, it mandated that every proposed investment must undergo independent scrutiny by the Investment Committee, Risk Management Unit and Compliance Department.
Similarly, the Risk Management Unit must certify that the investment would not expose the pension fund to excessive concentration, liquidity or correlation risks. At the same time, the Compliance Department must confirm full legal and regulatory compliance, including conflict-of-interest requirements and exposure calculations.
The commission also introduced extensive conflict-of-interest management requirements to strengthen transparency and accountability.
As such, PFAs are now required to maintain a formal register documenting every investment involving custodian-linked entities, detailing the relationship, decision-makers, conflict declarations and mitigation measures.
Officials with overlapping affiliations to either the issuer or custodian group must disclose such interests and recuse themselves completely from the approval process.
PenCom also reinforced disclosure obligations by requiring PFAs to submit quarterly reports detailing all holdings in custodian parent companies, including acquisition dates, valuation methodology, percentage exposure to portfolio NAV and changes from previous reporting periods.
The commission further directed PFAs to notify it within 48 hours whenever any exposure limit is breached or where a custodian’s parent company experiences financial distress.
. Grants two-year regulatory forbearance to boost pension fund returns
Ndubuisi Francis and James Emejo in Abuja
The National Pension Commission (PenCom) has extended its regulatory forbearance, allowing Pension Fund Administrators (PFAs) to invest pension assets in a broader range of securities issued by the parent companies of their respective Pension Fund Custodians (PFCs).
Specifically, PenCom announced a 24-month extension of its regulatory forbearance to allow PFAs to invest in a broader range of securities issued by the parent companies or HoldCos of their respective PFCs.
PenCom said the extension reflected prevailing market realities, including operational constraints and the limited availability of quality investable instruments in the domestic market.
The move was aimed at expanding investment opportunities while maintaining stringent safeguards to protect contributors’ funds.
The commission, in a circular dated July 3, 2026, and signed by its Director, Surveillance Department, AM Saleem, which was addressed to licensed Pension Fund Operators (PFOs), further stated that the temporary regulatory relief would remain in force for 24 months.
According to the commission, widening the eligible investment universe would provide PFAs with greater portfolio flexibility, improve diversification and enhance their ability to generate optimal risk-adjusted returns in line with their fiduciary responsibilities to Retirement Savings Account (RSA) holders.
However, PenCom stressed that the extension of the forbearance did not constitute a relaxation of investment discipline, insisting that every investment involving custodian-related entities must meet the same fiduciary standards applicable to all pension investments.
It emphasised that the mere relationship between a security issuer and a pension fund custodian must never confer preferential treatment.
The commission further directed that all transactions must be conducted strictly on an arm’s-length basis and on prevailing market terms, warning that governance safeguards alone cannot eliminate correlation and contagion risks.
Consequently, it maintained quantitative prudential limits on such investments to prevent excessive concentration of pension assets.
Under the new framework, PFAs may invest only in equities and financial instruments issued by the holding companies of their custodians, provided such parent companies were licensed financial institutions regulated by the Central Bank of Nigeria (CBN), publicly quoted on a Securities and Exchange Commission (SEC)-recognised securities exchange and possessed a proven record of financial soundness.
The companies must also demonstrate sustained profitability, a history of dividend payments, regulatory compliance, and have no unresolved enforcement actions.
To further mitigate risks, PenCom introduced detailed exposure limits across RSA fund categories.
For ordinary shares, investments in parent companies were capped at one per cent for Funds I, II, V-Growth and VI-Active, while Funds III, IV, V-Conservative and VI-Retiree may invest up to three per cent.
For bonds, exposure was limited to three per cent for Funds I, II, V-Growth, and VI-Active, and to five per cent for Funds III, IV, V-Conservative, and VI-Retiree.
In addition, the commission ruled that the combined exposure of an RSA fund to equities and bonds issued by the parent company of a PFC must not exceed five per cent of the portfolio’s consolidated net asset value (NAV).
Overall exposure to all securities issued by the custodian’s parent company, including money market instruments, must not exceed 10 per cent of the portfolio’s consolidated NAV.
PenCom also imposed restrictions on participation in corporate bond issues involving custodian parent companies.
Accordingly, no PFA may subscribe to more than 20 per cent of any bond issue rated “A” or above, while participation in bonds rated “BBB” was capped at 15 per cent.
The commission noted that these thresholds would operate alongside the broader limits contained in the Regulation on Investment of Pension Fund Assets.
Also, recognising the heightened fiduciary sensitivity associated with investments involving related parties, it mandated that every proposed investment must undergo independent scrutiny by the Investment Committee, Risk Management Unit and Compliance Department.
Similarly, the Risk Management Unit must certify that the investment would not expose the pension fund to excessive concentration, liquidity or correlation risks. At the same time, the Compliance Department must confirm full legal and regulatory compliance, including conflict-of-interest requirements and exposure calculations.
The commission also introduced extensive conflict-of-interest management requirements to strengthen transparency and accountability.
As such, PFAs are now required to maintain a formal register documenting every investment involving custodian-linked entities, detailing the relationship, decision-makers, conflict declarations and mitigation measures.
Officials with overlapping affiliations to either the issuer or custodian group must disclose such interests and recuse themselves completely from the approval process.
PenCom also reinforced disclosure obligations by requiring PFAs to submit quarterly reports detailing all holdings in custodian parent companies, including acquisition dates, valuation methodology, percentage exposure to portfolio NAV and changes from previous reporting periods.
The commission further directed PFAs to notify it within 48 hours whenever any exposure limit is breached or where a custodian’s parent company experiences financial distress.
