The National Pension Commission (PenCom) on Friday extended a 24-month regulatory forbearance allowing Pension Fund Administrators (PFAs) to buy securities issued by the parent companies of their Pension Fund Custodians (PFCs).
The circular, dated July 3 and signed by A.M. Saleem, Director of Surveillance, aims to widen the investable universe for pension funds while imposing new guardrails to limit concentration and conflicts of interest.
PenCom said the step responds to “prevailing market realities,” including operational constraints and a shortage of quality domestic instruments. By opening access to qualifying PFC parent companies, the regulator expects to boost portfolio flexibility, support liquidity in Nigeria’s financial markets and help PFAs pursue improved risk-adjusted returns for contributors.
Eligibility and caps to limit concentration
PenCom said that nly parent companies that are licensed financial institutions under the Central Bank of Nigeria and listed on an exchange recognised by the Securities and Exchange Commission qualify. These firms must show robust financial health, a track record of profitability and dividend payments, and no unresolved regulatory enforcement actions.
To manage concentration risk, PenCom set explicit exposure limits:
Equity: up to three per cent of a fund’s assets in ordinary shares of a qualifying PFC parent for Funds I, II, VI-Active and V-Growth; one per cent for Funds III, IV, VI-Retiree and V-Conservative.
Corporate bonds: caps of five per cent for higher-risk funds and three per cent for conservative and retiree funds.
Combined exposure to a single PFC parent’s equities and bonds cannot exceed five per cent of an RSA fund’s net asset value; total exposure to all securities from that parent (including money market instruments) is capped at 10 per cent.
Limits on lower-rated debt: maximum 20per cent exposure to any “A”-rated bond issue and 15 per cent to any “BBB”-rated issue from a PFC parent.
Strengthened governance and disclosure
PenCom attached governance and disclosure conditions intended to reduce conflicts and preserve fiduciary duty. PFAs must secure independent reviews by their investment committee, risk and compliance units, and obtain board approval before proceeding.
They are required to: Maintain a PFC-Party Conflict Register; File quarterly disclosures of holdings in PFC parent companies (acquisition dates, valuations, exposure levels).
Disclose exposures clearly in audited financial statements.
Report breaches of investment limits or material financial distress at a parent company to PenCom within 48 hours.
The forbearance follows earlier regulatory updates this year that increased allowable equity allocations across several Retirement Savings Account fund categories. Taken together, the moves signal PenCom’s intent to give PFAs more room for active asset allocation while trying to balance market development with contributor protection.
