The National Pension Commission (PenCom) has introduced a 24-month regulatory forbearance, allowing Pension Fund Administrators (PFAs) to broaden their investment portfolios to include securities issued by the parent companies of their respective Pension Fund Custodians (PFCs).
This decision, outlined in a circular dated July 3, 2026, and signed by A.M. Saleem, Director of the Surveillance Department, aims to address prevailing market realities.
Rationale for Expanded Investment Options
PenCom stated that the measure reflects operational constraints and the limited availability of quality investable instruments within the domestic market. The forbearance is designed to enhance portfolio flexibility and expand the universe of eligible investments for PFAs.
The Commission emphasized that this move will improve diversification and support the generation of optimal risk-adjusted returns for pension contributors, aligning with PFAs' fiduciary obligations.
Eligibility and Investment Limits
Under the new framework, only parent companies of Pension Fund Custodians that are licensed financial institutions regulated by the Central Bank of Nigeria will qualify for investment. Eligible companies must also be publicly listed on a Securities and Exchange Commission-recognized exchange and demonstrate strong financial health, including a history of profitability, dividend payments, and regulatory compliance.
To mitigate concentration risks, PenCom has established specific investment caps across various asset classes and pension fund categories. For equity investments, PFAs may invest 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.
Exposure for Funds III, IV, VI-Retiree, and V-Conservative is limited to 1%. For corporate bonds issued by eligible parent companies, the exposure is capped at 5% for higher-risk funds and 3% for conservative and retiree-focused funds.
Additionally, total exposure to a PFC parent company’s equities and bonds cannot exceed 5% of a Retirement Savings Account (RSA) fund’s consolidated net asset value (NAV). The overall exposure to all securities issued by the parent company, including money market instruments, is capped at 10%.
The Commission also restricted investments in lower-rated debt instruments, limiting exposure to 20% of any “A”-rated corporate bond issue and 15% of any “BBB”-rated issue issued by a PFC parent company.
Enhanced Governance and Disclosure Requirements
PenCom mandates that PFAs implement enhanced governance controls before making any investment under this forbearance arrangement. Proposed investments must undergo independent review by the Investment Committee, Risk Management Unit, and Compliance Department of the PFA, with final approval from the board.
PFAs are directed 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 also clearly disclose all exposures to contributors.
Any breach of investment limits or material financial distress involving a parent company must be reported to PenCom within 48 hours. The regulator stressed that all investments involving PFC-related entities must be conducted on arm’s-length terms and adhere to the same fiduciary standards applicable to all pension assets.
This latest directive follows PenCom’s revised pension investment regulations issued earlier this year, which increased the allowable equity allocation across several Retirement Savings Account fund categories. These changes were intended to provide PFAs with greater flexibility in asset allocation and improve long-term portfolio performance, while supporting liquidity and capital formation in Nigeria’s financial markets.
