The National Pension Commission (PenCom) has introduced a significant regulatory forbearance, granting Pension Fund Administrators (PFAs) a 24-month window to invest in a wider spectrum of securities issued by the parent companies of their respective Pension Fund Custodians (PFCs). This strategic move, detailed in a circular dated July 3, 2026, and signed by A.M. Saleem, Director of the Surveillance Department, aims to address prevailing market conditions, including operational challenges and a scarcity of high-quality investable instruments within the domestic landscape.
PenCom articulated that this measure is designed to equip PFAs with enhanced portfolio flexibility, thereby expanding the universe of eligible investments and fostering greater diversification. The ultimate objective is to bolster the generation of optimal risk-adjusted returns for pension contributors, aligning with the fiduciary duties of PFAs. The Commission stated, “The Commission hereby extends its existing regulatory forbearance to permit Pension Fund Administrators (PFAs) to invest in a broader range of securities issued by the parent companies of their respective Pension Fund Custodians. This measure would enhance portfolio flexibility and broaden the investable universe, enhance diversification, and improve PFAs’ ability to achieve optimal risk-adjusted returns in line with their fiduciary obligations.”
Under the revised framework, eligibility for investment is strictly confined to parent companies of Pension Fund Custodians that are licensed financial institutions regulated by the Central Bank of Nigeria. Furthermore, these eligible companies must be publicly listed on a securities exchange recognised by the Securities and Exchange Commission. Crucially, they must demonstrate robust financial health, evidenced by a consistent history of profitability, dividend payments, adherence to regulatory requirements, and the absence of any outstanding enforcement actions.
To mitigate concentration risks, PenCom has stipulated specific investment caps across various asset classes and pension fund categories. For equity investments, PFAs are permitted to allocate up to 3% of pension assets in the ordinary shares of a qualifying PFC parent company for Funds I, II, VI-Active, and V-Growth. A more conservative limit of 1% applies to Funds III, IV, VI-Retiree, and V-Conservative. Regarding corporate bonds issued by eligible parent companies, exposure is capped at 5% for higher-risk funds and 3% for conservative and retiree-focused funds. The aggregate exposure to a PFC parent company’s equities and bonds is further restricted to a maximum of 5% of a Retirement Savings Account (RSA) fund’s consolidated net asset value (NAV). The overall exposure to all securities issued by a parent company, inclusive of money market instruments, is capped at 10%. Investments in lower-rated debt instruments are also curtailed, with exposure limited to 20% of any “A”-rated corporate bond issue and 15% of any “BBB”-rated issue from a PFC parent company.
PenCom has mandated that PFAs implement stringent governance controls prior to engaging in any investment under this forbearance arrangement. Proposed investments must undergo a rigorous independent review process involving the PFA’s Investment Committee, Risk Management Unit, and Compliance Department, with final approval resting with the board. Additionally, PFAs are required to maintain a dedicated PFC-Party Conflict Register and submit quarterly disclosures detailing their holdings in PFC parent companies, including acquisition dates, valuations, and portfolio exposure levels. Audited financial statements must also clearly delineate all exposures to contributors. Any breach of investment limits or material financial distress concerning a parent company must be reported to PenCom within 48 hours. The regulator underscored that all investments involving PFC-related entities must be conducted on an arm’s-length basis and adhere to the same fiduciary standards applicable to all pension assets.
This latest directive builds upon PenCom’s revised pension investment regulations issued earlier this year, which had already increased allowable equity allocations across several RSA fund categories. These prior adjustments were widely interpreted as a strategic effort to enhance PFAs’ asset allocation flexibility and improve long-term portfolio performance, while simultaneously supporting liquidity and capital formation within Nigeria’s financial markets.
... PenCom Unlocks New Investment Avenues for PFAs with 24-Month Forbearance on Parent Company Securities ... Naijaonpoint.