By Chinwendu Obienyi
Market analysts on Tuesday, hailed the National Pension Commission (PenCom)’s move to lift the suspension on investments in commercial papers by Licensed Pension Fund Administrators (LPFAs) where non-bank capital market operators act as Issuing and Paying Agents (IPAs).
They added that this deepen Nigeria’s capital market and that the re-entry of pension funds, which are among the largest institutional investors, is expected to enhance liquidity and market activity.
This is coming after PenCom in a statement yesterday announced that it has lifted its suspension on investments in commercial papers by LPFAs.
The commission had initially imposed a restriction due to regulatory gaps concerning non-bank IPAs, raising concerns over the safety of pension fund investments. The absence of clear guidelines meant these transactions operated outside the oversight frameworks, potentially exposing pension funds to risks.
However, the Securities and Exchange Commission (SEC) has since taken steps to address these issues by drafting new rules and amending Rule 8 (Exemptions). These amendments aim to regulate the involvement of non-bank IPAs in commercial paper issuances, aligning their activities with regulatory frameworks.
Hence, based on these efforts, PenCom has lifted its restriction, emphasizing that LPFAs must conduct thorough legal and financial due diligence before investing in commercial papers, as outlined in Section 2.9 of the Regulation on Investment of Pension Fund Assets.
The circular read: “The Commission has noted that the Securities and Exchange Commission (SEC) has developed draft rules and an amendment to rule 8 (Exemptions) to regulate the issuance of Commercial Papers by its regulated entities. Accordingly, the SEC is addressing the Commission’s concern about the role of non-bank IPAs in Commercial Paper transactions by bringing them within regulatory boundaries.
Consequently, to facilitate capital raising and ensure continued market stability, the Commission has lifted its restriction on LPFAS investing in commercial papers where capital market operators act as IPAs. Nonetheless, LPFAS must ensure that appropriate legal and financial due diligence is 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.”
Reacting to the development, market operators told Daily Sun that the move will enhance the capacity for capital raising in Nigeria’s financial markets.
The Chief Executive Officer, Crane Securities Limited, Mike Eze, said this will provide corporations and government entities with better access to funding.
According to him, the move will ensure pension fund investments remain safeguarded within a stable and regulated environment.
“This development is a step forward in strengthening Nigeria’s financial ecosystem. By addressing regulatory gaps, it provides a framework for economic growth, improved investor confidence, and enhanced market stability. However, its success depends on vigilant implementation and ongoing collaboration between regulators, pension administrators, and the corporate sector”, he stated.
Meanwhile, the news appeared to boost trade turnover volume on the floor of the Nigerian Exchange Limited (NGX).
Despite sell-offs in high capitalized stocks and a dip in market capitalisation, trade turnover settled higher relative to the previous session with investors involved in a total of 1.16 billion shares valued at N27.36 billion and exchaged in 9,403 deals.