PenCom’s revised investment rules earn praise

• strengthen pension funds’ governance roles

The National Pension Commission’s (PenCom) 2025 Revised Regulation on Investment of Pension Fund Assets has attracted widespread commendation from corporate governance advocates and capital market stakeholders, who say the new rules will deepen pension funds’ influence as active stewards of Nigeria’s listed companies.

The revised regulation, which strengthens provisions on shareholder voting, engagement, transparency and accountability, is being described by market operators as one of the most governance-focused reforms in the history of pension regulation in Nigeria.

Analysts note that the reforms are significant given that pension funds control one of the country’s largest pools of long-term capital, with growing influence on boardroom decisions.

Under the new framework, voting rights attached to pension assets are no longer to be treated as a passive formality.

PenCom now explicitly requires Pension Fund Administrators (PFAs) to regard voting as a fiduciary duty tied to the welfare of contributors and beneficiaries.

The regulation mandates PFAs to instruct Pension Fund Custodians (PFCs) to exercise voting rights “in a manner that is prudent, diligent, and in the best long-term interests of contributors and beneficiaries,” effectively reinforcing the role of pension funds as institutional owners with responsibility for promoting sustainable value and accountability.

A major highlight of the revised rules is the requirement for PFAs to maintain a Board-approved Voting and Engagement Policy.

According to the Director-General, PenCom, the policy must outline voting principles, engagement and escalation procedures, and mechanisms for identifying and managing conflicts of interest.

The policy is also expected to cover procedures for recalling lent securities for voting on material matters, as well as oversight arrangements for assessing custodians’ voting execution. Governance experts say this marks a shift from informal and inconsistent voting practices to a structured stewardship model aligned with global best practice.

In a further move to enhance transparency, PenCom, Ms Omolola Oloworaran said the commission now requires detailed record-keeping and disclosure of voting activities. Custodians are to document and report all votes cast on behalf of PFAs, while PFAs must retain proxy voting records, including the rationale for significant votes, and make them available to the Commission on request.

PFAs are also required to disclose annually to contributors and PenCom a summary of significant votes, engagements and outcomes achieved. Stakeholders believe this will allow contributors to better understand how their retirement savings are being deployed to influence corporate governance decisions.

Meanwhile, the issuance of the revised regulation under the leadership of PenCom’s newly appointed Director-General has been interpreted as a signal of renewed commitment to strengthening governance across Nigeria’s capital market.

Market watchers say the DG’s reform agenda reflects a philosophy that pension funds should go beyond capital provision to actively promote governance standards that protect contributors and enhance long-term investment performance.

Stakeholders also expect the guidelines to drive improvements in board composition and shareholder alignment at listed companies, with pension funds encouraged to engage more actively on issues such as board independence, director competence, diversity, conflicts of interest and disclosure quality.

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Industry participants’ note that the new stewardship framework also supports more structured collaboration among institutional investors, provided such engagement does not undermine independent fiduciary decision-making.

Sections 12.1 to 12.6 of the regulation, they say, provide a basis for coordinated engagement and aligned voting principles, while preserving each PFA’s autonomy.

Analysts believe the revised rules could mark a turning point for Nigeria’s capital markets, with potential benefits including reduced governance-related investment risks, improved transparency and investor confidence, stronger risk management at listed companies and better protection of pension contributors’ retirement savings.

As implementation begins, attention is expected to shift to outcomes whether PFAs adopt robust voting policies, improve annual disclosures and whether listed companies respond by strengthening board structures and governance practices.

For now, governance advocates say the revised guidelines represent meaningful progress and a strong signal of PenCom’s intention to deepen the role of pension funds as responsible, long-term stewards of Nigeria’s listed companies.