Amid ongoing exchange rate fluctuations, Nigeria’s Closed Pension Fund Administrators (CPFAs) have increased their investments in foreign securities, taking advantage of new regulatory latitude and diversification opportunities.
According to the latest portfolio report released by the National Pension Commission (PenCom) for the period ending August 31, 2025, CPFAs raised their investments in foreign money market instruments by 12.4% month-on-month, from ₦83.7 billion in July to ₦94.1 billion in August.
Investments in foreign equities also rose by 2.2%, reaching ₦277.4 billion, up from ₦271.3 billion in the previous month.
This shift in investment strategy aligns with recent guidelines issued by PenCom, which now allow Pension Fund Administrators (PFAs) previously excluded to also invest part of pension assets in foreign currency-denominated instruments. Until recently, this privilege was exclusive to CPFAs, which typically manage retirement savings for employees of specific corporate groups and often pay salaries in foreign currency.
Meanwhile, pension funds’ investments in Federal Government of Nigeria (FGN) securities also recorded modest growth:
- Total FGN securities: up 1.3% to ₦15.8 trillion in August (₦15.6 trillion in July)
- FGN Bonds: increased 3.4% to ₦15.1 trillion
- Treasury Bills: rose 2.3% to ₦610.3 billion
- Green Bonds: climbed 17.9% to ₦12.5 billion
- Sukuk Bonds: dropped sharply by 71.7%, falling to ₦100.9 billion from ₦356.2 billion
New PenCom Guidelines on Foreign Currency Contributions
To support the growing need for FX-denominated investment options, PenCom recently issued a new regulatory framework for Licensed Pension Fund Operators (LPFOs). The guidelines allow pension contributors earning or residing in foreign jurisdictions to remit and invest pension funds in foreign currency, with detailed compliance procedures.
Key Objectives of the New Guidelines:
- Enable diaspora Nigerians and those earning in foreign currency to contribute to the Contributory Pension Scheme (CPS)
- Provide a secure, transparent system for managing FX contributions
- Diversify pension fund investments
- Align with international best practices and local regulations
How It Works:
- Diaspora contributors must open a Non-Resident Nigerian Ordinary Account (NRNOA) to remit their pension in FX.
- Resident contributors must use a Domiciliary Account (DA) with a collecting bank linked to the Pension Fund Custodian (PFC).
- All contributions are retained in USD and invested per PenCom’s approved instruments.
Allowable FX Investment Instruments Include:
- Eurobonds, Global Depository Notes/Receipts
- CBN and FGN FX-denominated bonds
- Supranational bonds from Multilateral Development Finance Organizations (MDFOs)
- Sukuk bonds issued by eligible banks
- REITs, private equity, infrastructure, and non-interest compliant mutual funds
- ETFs and specialist funds approved by the Securities and Exchange Commission (SEC)
Why It Matters:
This move marks a strategic diversification of Nigeria’s pension asset base amid macroeconomic volatility and currency devaluation concerns. It also aligns with broader efforts by regulators to:
- Expand pension access to diaspora contributors
- Enhance the risk-return profile of pension portfolios
- Support infrastructure and economic development through diversified funding
About the Author
