Nigeria: PenCom’s Updated Investment Rules Strengthen Pension Fund Governance

The National Pension Commission (PenCom) has unveiled its 2025 Revised Regulation on Investment of Pension Fund Assets, earning widespread acclaim from corporate governance advocates and capital market stakeholders. Experts say the updated framework is poised to enhance pension funds’ role as active stewards of Nigeria’s publicly listed companies, while promoting regulatory compliance and risk mitigation in investment management.

Market participants describe the reform as one of the most governance-focused updates in the history of Nigeria’s pension regulation, strengthening provisions on shareholder engagement, transparency, and accountability. Analysts emphasize the importance of these reforms, noting that pension funds control one of Nigeria’s largest pools of long-term capital, giving them growing influence on boardroom decisions.

Under the new rules, voting rights attached to pension assets are no longer a passive formality. Pension Fund Administrators (PFAs) are now explicitly required to treat voting as a fiduciary responsibility, directly tied to the welfare of contributors and beneficiaries. PFAs must instruct Pension Fund Custodians (PFCs) to exercise these rights prudently, diligently, and in the long-term interest of contributors, reinforcing the role of pension funds as institutional owners promoting sustainable value and governance standards.

A key feature of the revised regulation is the mandatory development of a Board-approved Voting and Engagement Policy. According to the Director-General of PenCom, the policy must detail voting principles, escalation procedures, and methods for managing conflicts of interest, ensuring that all activities align with global best practices in compliance management and regulatory reporting.

The policy should also cover processes for recalling lent securities to vote on material matters and oversight mechanisms for evaluating custodians’ voting execution. Governance specialists note that this move marks a transition from informal, inconsistent practices to a structured stewardship framework aligned with global RegTech solutions trends.

To further enhance transparency and accountability, PenCom requires detailed documentation and disclosure of all voting activities. Custodians must record and report votes cast on behalf of PFAs, while PFAs must maintain proxy voting records—including rationales for significant votes—and make them available to the Commission on request. Annual summaries of key votes, engagements, and outcomes must also be disclosed to contributors and PenCom, allowing stakeholders to track how retirement savings influence corporate governance decisions.

The revised regulation, introduced under the leadership of PenCom’s newly appointed Director-General, signals a renewed commitment to elevating governance standards across Nigeria’s capital market. Analysts say the reform reflects a philosophy that pension funds should extend beyond capital provision to actively drive compliance automation, risk assessment, and regulatory intelligence.

Stakeholders anticipate that the new framework will encourage improvements in board composition, director competence, independence, diversity, and disclosure quality at listed companies. The guidelines also support coordinated engagement among institutional investors while preserving PFAs’ independent fiduciary decision-making, particularly through sections 12.1 to 12.6 of the regulation.

Experts believe these reforms could be transformative for Nigeria’s capital markets, reducing governance-related risks, strengthening internal controls, boosting investor confidence, and safeguarding contributors’ retirement savings. As implementation begins, the focus will shift to how effectively PFAs adopt robust voting policies, improve annual disclosures, and influence listed companies to enhance governance practices.

For now, governance advocates welcome the revised regulation as a major step forward, underscoring PenCom’s intention to position pension funds as responsible, long-term stewards of Nigeria’s listed companies while advancing regulatory compliance services, compliance management systems, and RegTech innovations in the financial sector.