Why Approval For Pension Funds Investment In NGX Derivatives Has Not Been Granted- PenCom

The National Pension Commission has said that it is still monitoring developments in the derivatives markets introduced in the Nigerian capital market and will not be quick to permit Pension Fund Administrators to invest in the security.

The Head of the Investment Monitoring Unit of PenCom, John Abazuwa, said this at the Nigeria Exchange Group Derivatives Workshop monitored by THE WHISTLER.

The workshop was organised by the NGX to inform market stakeholders about NGX’s Single Stock Futures product launch.

A Single-Stock Future (SSF) is a type of futures contract between two parties where the buyer purchases and the seller sells a single stock at a predetermined future date and price.

The SSF provides investors the opportunity to speculate and hedge against adverse market conditions.

Abazuwa told the NGX that PenCom welcomes the innovation that seeks to deepen the Nigerian capital market.

He said the commission needs time to monitor developments before it can amend its laws to allow PFAs to invest in the security.

As of October 2023, Nigeria’s pension fund assets were N17.2trn, according to PenCom.

Abazuwa said, “Derivatives is not an allowable investment for pension fund assets. When we have a new product in the market, the role of the commission is to try and understand it.

“What we are doing is trying to look at how it is going to be operational in the market. Look at how comfortable we are going to be with it vis-a-vis the regulations around it. We would like to see what the SEC has in its regulations. We would like to see the mechanism to safeguard the pension fund.

“We are all aware that the matter of safety of the pension fund requires PFAs to invest in a manner that will ensure safety. For us here, we believe it is a good product, but we must understand how it is being done in the market.

“We must build capacity and now come back to amend our regulations to allow it as one of the instruments pension funds can be invested in.”