PENCOM Moves to Expand Investment Options for PFAs
The Nigeria's Pension Commission (PENCOM) recently released the exposure draft on new guidelines for investment of pension funds.
The draft guideline provides more investment options that Pension Fund Administrators (PFAs) can choose from, and set new eligibility criteria for appointments of heads of investment of PFAs.
Potential Implications of Expanded Investment Options for PFAs
• PFAs were not previously allowed to invest directly in Commercial Papers without deposit money bank guarantees. This guideline now allows PFA's to invest directly to a maximum of 10% in Commercial Papers of corporate entities. We expect that this will increase the depth and number of instruments available.
• PFA's investment in bonds/debts of state that has fully implemented the Contributory Pension Scheme would not only increase pension coverage but put pleasure on states that are yet to adopt the Contributory Pension Scheme.
• PFA's investing directly in commercial papers of corporate entities without a financial intermediary or the underlying guarantee will potentially boost the money market.