The National Pension Commission has lifted its suspension on investments in commercial papers by Licensed Pension Fund Administrators, marking a significant shift for the pension sector.
The initial suspension, imposed in October, barred LPFAs from investing in commercial papers issued and paid for by non-bank capital market operators (IPAs).
This decision was made in response to regulatory concerns raised as a result of the lack of defined rules governing the roles of these operators.
In a statement issued on Tuesday, PenCom stated that the Securities and Exchange Commission addressed these issues by developing new regulations and changes to regulate commercial paper issuance.
“PenCom has noted that SEC has developed draft rules and an amendment to Rule 8 (Exemptions) to regulate the issuance of Commercial Papers by its regulated entities,” the statement read.
The Commission emphasized that SEC’s regulatory framework now brings non-bank IPAs under stricter oversight.
“SEC is addressing PenCom’s concern about the role of non-bank IPAs in commercial paper transactions by bringing them within regulatory boundaries,” PenCom noted.
PenCom removed the prohibition with the revised regulatory safeguards, demonstrating its dedication to promoting capital raising and maintaining market stability.
“Consequently, to facilitate capital raising and ensure continued market stability, PenCom has lifted the restriction on LPFAs investing in commercial papers where capital market operators act as IPAs,” the Commission stated.
PenCom also issued a cautionary note to LPFAs, emphasising the significance of conducting complete legal and financial due diligence before making any transaction.
“LPFAs must ensure that appropriate legal and financial due diligence are undertaken on all Prospectus/Offer Documents of all commercial papers prior to investment, as stipulated in Section 2.9 of the Regulation on Investment of Pension Fund Assets,” the statement went on to say.
This reform is expected to boost investment activity in Nigeria’s commercial paper sector, opening up new potential for pension fund growth while improving regulatory monitoring and investor protection.
