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The National Pension Commission (PenCom) is in the process of formulating regulations to allow Pension Fund Administrators (PFAs) to engage in securities lending as an investment option within the capital market. This development was revealed during a workshop jointly organized by the Nigerian Exchange Limited, the Securities and Exchange Commission, and PenCom. The workshop centered around the theme “Business Facilitation Act 2023 as a catalyst for deepening securities lending in Nigeria.”
Ibrahim Kangiwa, the Head of Investment Supervision at PenCom, highlighted that Section 89 of the Pension Reform Act 2014 had previously imposed limitations on PFAs’ participation in securities lending. He acknowledged that this restriction had posed a significant obstacle to the practice. However, the recent passage of the Business Facilitation Act 2023 has opened the path for the development of guidelines related to securities lending.
Kangiwa stated, “This provision regarding restrictions on the sale and borrowing of pension assets has been a major encumbrance of securities lending. With the passage of the Business Facilitation Act 2023, it has now actually enabled us to proceed with developing guidelines towards securities’ lending.”
He further emphasized that PenCom had been considering securities lending as a potential initiative even prior to this legislative development. The commission is concurrently reviewing the investment regulations that govern PFAs’ investment activities. The intention is to update and amend specific aspects of these regulations, thereby broadening the range of available assets and deepening the investment opportunities for PFAs.
Meanwhile, Jude Chiemeka, the Divisional Head of Capital Market at the Nigerian Exchange Limited, expressed the exchange’s commitment to collaborating with all relevant stakeholders to enhance securities lending transactions. Chiemeka conveyed the exchange’s dedication to fostering collaboration and collective efforts that contribute to the advancement of securities lending practices. He reiterated the exchange’s mission to contribute to the growth and development of the capital market within Nigeria and Africa.
The move to enable PFAs to engage in securities lending reflects a significant shift in the regulatory landscape. By revisiting and updating the regulations, PenCom aims to create a more conducive environment for PFAs to explore securities lending as an investment strategy. This development aligns with broader efforts to enhance the efficiency and effectiveness of the Nigerian capital market.
As PenCom progresses with the formulation of the necessary regulations, the investment community anticipates increased diversification of investment strategies among PFAs. The potential inclusion of securities lending could provide PFAs with new avenues to generate returns on pension assets, ultimately benefiting pensioners and contributing to the overall growth of the Nigerian financial ecosystem.
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