Reported by: Oahimire Omone Precious | Edited by: Oravbiere Osayomore Promise.
The National Pension Commission (PenCom) has extended its regulatory forbearance, granting Pension Fund Administrators (PFAs) a 24-month window to invest pension assets in a broader range of securities issued by the parent companies of their respective Pension Fund Custodians (PFCs). The move, announced in a circular dated July 3, 2026, and signed by the Director of the Surveillance Department, A.M. Saleem, is aimed at addressing prevailing market realities, including operational constraints and the limited availability of quality investable instruments in the domestic market.
The Commission stated that the extension of the forbearance is designed to provide PFAs with greater portfolio flexibility, expand the universe of eligible investments, and improve diversification while supporting the generation of optimal risk-adjusted returns for pension contributors. “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,” PenCom said.
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 are licensed financial institutions regulated by the Central Bank of Nigeria (CBN), publicly quoted on a Securities and Exchange Commission (SEC)-recognised securities exchange, and possess 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 mitigate concentration risks, PenCom introduced detailed exposure limits across RSA fund categories. For ordinary shares, investments in parent companies are 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 is 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. 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), while 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. No PFA may subscribe to more than 20 per cent of any bond issue rated “A” or above, while participation in “BBB”-rated issues is capped at 15 per cent. The Commission stressed that the extension of the forbearance does 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. All transactions must be conducted strictly on an arm’s-length basis and on prevailing market terms.
To strengthen governance and prevent conflicts of interest, PenCom mandated that PFAs implement stringent governance controls before making any investment under the forbearance arrangement. Proposed investments must undergo independent review by the Investment Committee, Risk Management Unit, and Compliance Department of the PFA, while final approval must be obtained from the board. PFAs are also required to maintain a dedicated PFC-Party Conflict Register and submit quarterly disclosures detailing holdings in PFC parent companies, including acquisition dates, valuations, and portfolio exposure levels. Audited financial statements must clearly disclose all exposures to contributors, and any breach of investment limits or material financial distress involving a parent company must be reported to PenCom within 48 hours.
The regulatory relief, which takes effect immediately, follows earlier regulatory updates this year that increased allowable equity allocations across several Retirement Savings Account fund categories. The move signals PenCom’s intent to give PFAs more room for active asset allocation while balancing market development with contributor protection.
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