DG, PenCom

The National Pension Commission has directed Pension Fund Administrators and Pension Fund Custodians to report all foreign currency pension contributions above $10,000 to the Nigeria Financial Intelligence Unit within 24 hours of receipt.

The new directive forms part of the Guidelines on Foreign Currency Pension Contributions, released on the commission’s website on Tuesday. The framework is designed to open the Contributory Pension Scheme to Nigerians in the diaspora and residents earning in foreign currency, while tightening regulatory controls to prevent abuse of the system.

Under the guidelines, PFAs and custodians are required to comply with Section 3(1) of the Money Laundering (Prevention and Prohibition) Act 2022. This provision makes it mandatory to report all transactions above the $10,000 threshold, providing details such as the sender’s name, address, transfer amount, and purpose.

Suspicious contributions below $10,000 are also to be flagged in line with the Financial Intelligence Unit Act 2018.

“In line with Section 3(1) of the Money Laundering Act, PFAs and custodians shall ensure that all foreign currency contributions exceeding $10,000 are reported to the Nigeria Financial Intelligence Unit within 24 hours. The report must indicate the nature and amount of the transfer, the name and address of the sender, and any other information required by the NFIU,” PenCom stated.

The move, according to the commission, aligns Nigeria’s pension framework with international compliance standards while safeguarding against money laundering and terrorism financing.

The guidelines make provision for a wide category of contributors, including Nigerians living and working abroad, Nigerians and foreigners employed in Nigeria by foreign companies orh international organisations who are paid partly or wholly in foreign currency.

This inclusion ensures that diaspora workers and expatriates can channel their retirement savings directly into the CPS, without being constrained by naira-only contributions. To participate, contributors must provide valid identification such as a National Identification Number, an international passport, and next-of-kin details. Foreign workers in Nigeria are required to provide additional documentation.

All contributors must undergo strict Know Your Customer checks in compliance with anti-money laundering laws. Significantly, contributions must be made strictly in United States dollars, even where earnings are in another foreign currency.

Nigerians abroad are required to remit funds through Non-Resident Nigerian Ordinary Accounts, while local contributors must use domiciliary accounts linked to custodial banks

PenCom has also introduced rules to manage access to funds. Contributors must split their savings into two parts: 60 per cent may be accessed under limited conditions before retirement, and 40 per cent must be preserved until retirement.

Withdrawals are restricted to twice a year and only after the initial deposit has been in the Retirement Savings Account for at least six months. In addition, custodians must notify PFAs of contributions within 24 hours, while PFAs must inform contributors within the same period. Contributions that cannot be credited within 48 hours must be returned to the originating account.

Foreign currency contributions will be pooled into a dedicated Dollar Fund managed by PFAs. These funds will be invested mainly in: Dollar-denominated instruments such as Eurobonds and supranational bonds; Federal Government-backed securities; and Exchange-traded funds.

Investments in naira-denominated assets are permitted but must be hedged against currency risks using instruments such as futures or swaps approved by the Central Bank of Nigeria. To reduce exposure to defaults, PenCom set strict credit-rating and concentration limits. For instance:

No more than five per cent of the fund can be invested in AAA-rated corporate foreign bonds. Investments in BBB-rated instruments are capped at one per cent.

The guidelines provide that contributions and returns are tax-free if held for at least five years. Early withdrawals, however, will attract tax penalties, which custodians must remit to the relevant tax authority within 21 days.

PFAs are also mandated to submit daily and monthly reports to PenCom, detailing contributions, withdrawals, and portfolio valuations in both dollars and naira. The Nigeria Financial Intelligence Unit, which serves as the country’s central body for analysing and disseminating suspicious financial transaction reports, will play a pivotal role in monitoring compliance.

By enforcing the $10,000 threshold and requiring detailed reporting, the unit will strengthen regulatory visibility over foreign currency inflows into the pension sector. For Nigerians abroad and residents earning in dollars, the new policy provides a structured way to save for retirement in hard currency, insulating future pensions from exchange rate volatility.

For regulators, it provides visibility into dollar inflows, prevents the misuse of the pension system for illicit financial flows, and aligns Nigeria’s pension sector with global best practices. With diaspora remittances already a major contributor to Nigeria’s foreign exchange reserves, the policy is expected to boost confidence in the pension system while expanding the pool of investable dollar assets for PFAs.

As PenCom noted, the framework is “not only about broadening participation in the CPS but also about ensuring integrity, transparency, and security of pension contributions in foreign currency.”

Punch