The Securities and Exchange Commission (SEC) has released draft rules enabling pension funds in Nigeria to resume investments in commercial papers. This follows a prior directive from the National Pension Commission (PenCom) in October 2024 suspending such investments due to the absence of regulatory guidelines. With the new draft rules in place, SEC aims to ensure transparency and oversight, mandating legal and financial due diligence by Pension Fund Administrators (PFAs) before allocating funds to commercial papers.
The draft rules introduce stringent conditions for commercial paper issuers, including a minimum operational history of five years, three years of audited financial statements, investment-grade credit ratings, and adherence to a strict debt-to-equity ratio. These measures aim to mitigate risks and maintain the stability of Nigeria’s growing pension fund assets, which have reached ₦21.92 trillion. PenCom’s decision to lift the suspension signifies improved confidence in the market and is expected to boost capital raising and deepen Nigeria’s capital markets.
Despite the optimism, concerns remain about the timing of PenCom’s decision, as SEC’s draft rules are yet to take full effect. Stakeholders question whether the removal of restrictions is premature, emphasizing the need for clear regulatory frameworks to protect pension assets. The collaborative efforts between PenCom and SEC reflect a broader goal of fostering market stability and protecting investors.