PenCom Releases Circular on Securities Lending & Repo Transactions for PFAs!

Sele Media Africa
www.selemedia.org
Reported by David Joshua | Sele Media Africa Reporter

Abuja — The National Pension Commission (PenCom) has officially published a “Circular on Securities Lending and Repurchase (Repo) Transactions by Pension Fund Administrators (PFAs)”, alongside a Revised Regulation on the Investment of Pension Fund Assets. These new instruments are designed to expand investment options for pension funds, deepen Nigeria’s capital markets, and optimize returns while operating within defined risk boundaries. [1]

Key Provisions & Objectives

• The circular and the revised regulation are part of PenCom’s PensionRevolution 2.0 agenda. [1]
• PenCom states that these frameworks will enable PFAs to engage in securities lending — lending out securities temporarily to earn fees — and repo transactions as additional investment avenues. [1]
• The guidelines are intended to balance enhanced returns and capital market development with safeguards for pension assets(i.e., ensuring appropriate collateral, counterparty eligibility, and risk controls). [1]
• By giving pension funds new outlets, PenCom hopes to unlock liquidity, increase market depth, and make pension assets a dependable source of funding for national development. [1]

Background & Enabling Policy

• The recent Business Facilitation Act (Miscellaneous Provisions) 2022 amended Section 89(2) of the Pension Reform Act, enabling pension assets to qualify for securities lending, subject to guidelines from PenCom. [2]
• In past years, PenCom, SEC, and NGX have reiterated their commitment to deepening Nigeria’s securities lending market, citing the need for institutional investors (like PFAs) to play more active roles. [2]
• The circular appears in PenCom’s official list of circulars on its website under the title “Circular Securities Lending and Repurchase Transactions (Repos) By Pension Fund Administrators.” [3]

Implications & Considerations

• For PFAs: The new rules open up alternate revenue streams beyond traditional fixed income instruments, but PFAs will need strong risk management, due diligence, and possibly strengthened operational capabilities to engage in lending or repo markets effectively.
• For Contributors / Pensioners: If well implemented, these expanded investment tools could help foster better returns and help pension assets preserve value against inflation.
• For Capital Markets: Increased activity by pension funds may boost liquidity, pricing efficiency, and overall depth in Nigerian capital markets.
• Risks: The challenge will lie in ensuring that securities lending / repo activities do not expose pension funds to undue credit, collateral, or counterparty risks.

If you like, I can format this into a shorter social media version, or help you extract exact clauses and rules from the circular so the public can better understand what PFAs are allowed to do.

Citations:

1. Business Today NG: businesstodayng.com/pencom-unveils-revised-pension-investment-regulation-circular-on-securities-lending/?utm_source=chatgpt.com
2. Independent Newspaper Nigeria: independent.ng/sec-pencom-ngx-reiterate-commitment-to-deepening-securities-lending/?utm_source=chatgpt.com
3. National Pension Commission: www.pencom.gov.ng/category/regulations-codes/circulars/?utm_source=chatgpt.com

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