The National Pension Commission (PenCom) has reopened a crucial investment channel for Licensed Pension Fund Administrators (LPFAs) by lifting the suspension on investments in commercial papers managed by Non-Bank Capital Market Operators as Issuing and Paying Agents (IPAs). Announced in a circular dated December 3, 2024, this decision reflects the progress made by the Securities and Exchange Commission (SEC) in addressing regulatory gaps.

Background of the Suspension
In October 2024, PenCom temporarily restricted LPFA investments in these Commercial Papers due to the absence of robust regulatory guidelines for non-bank IPAs. The move was a protective measure aimed at ensuring the safety of pension fund assets while SEC worked on creating a comprehensive regulatory framework.

What Changed?
The Securities and Exchange Commission (SEC) has since introduced draft rules and amendments to ensure non-bank IPAs operate within a regulated structure, enhancing transparency and mitigating risks. This advancement prompted PenCom to lift the restriction, with strict compliance measures for LPFAs to follow.

Key Updates from the Circular

• LPFAs can now invest in commercial papers issued through non-bank capital market operators as IPAs.
• LPFAs must conduct rigorous legal and financial due diligence on prospectuses and offer documents, adhering to Section 2.9 of PenCom’s Regulation on Investment of Pension Fund Assets.
• SEC’s updated rules provide a clear regulatory framework, ensuring greater transparency and stability in the commercial paper market.

Market Implications
This policy shift marks a significant milestone for Nigeria’s capital market, enhancing its role as a vital funding source for businesses and public infrastructure. The reopening of this market for LPFAs is expected to support capital-raising initiatives while maintaining strong protections for pension fund assets.

PenCom has emphasised the importance of due diligence, reminding LPFAs of their responsibility to safeguard pensioners’ funds. The Commission’s commitment to balancing market growth with investor protection reinforces trust in Nigeria’s evolving financial ecosystem.

By unlocking this investment avenue, PenCom is fostering a more dynamic, transparent, and resilient financial environment. As SEC finalises its regulatory framework, this development is poised to boost market confidence, drive economic growth, and provide new opportunities for both investors and the broader economy.