The National Pension Commission has issued new directives requiring Pension Fund Administrators and Pension Fund Custodians to report all foreign currency pension contributions exceeding $10,000 to the Nigeria Financial Intelligence Unit within 24 hours of receipt.
The fresh guidelines, published on the commission’s official website on Tuesday, establish comprehensive rules for foreign currency pension contributions whilst strengthening regulatory oversight to combat potential system abuse.
The directive forms part of PenCom’s Guidelines on Foreign Currency Pension Contributions, designed to extend the Contributory Pension Scheme to Nigerians living abroad and local residents earning foreign currency income.
“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,” PenCom stated in the guidelines.
The reporting requirements mandate that administrators provide comprehensive details including the sender’s name, address, transfer amount, and transaction purpose. Even contributions below the $10,000 threshold must be flagged if deemed suspicious, in accordance with the Financial Intelligence Unit Act 2018.
The new framework accommodates several categories of contributors, including Nigerians working overseas, Nigerian and foreign employees of international organisations based in Nigeria who receive foreign currency payments, and other qualifying participants.
Contributors must provide valid identification documents including National Identification Numbers, international passports, and next-of-kin information. Foreign workers in Nigeria face additional documentation requirements and must undergo rigorous Know Your Customer verification processes.
PenCom has restricted contributions to US dollars exclusively, even where earnings originate in other foreign currencies. Nigerians abroad must remit funds through Non-Resident Nigerian Ordinary Accounts, whilst local contributors must utilise domiciliary accounts linked to approved custodial banks.
The commission has introduced structured access rules requiring contributors to divide their savings into two portions: 60 per cent accessible under specific conditions before retirement, and 40 per cent preserved until retirement age.
Withdrawal restrictions limit access to twice annually, with initial deposits requiring a minimum six-month maturity period in Retirement Savings Accounts. Custodians must notify PFAs of contributions within 24 hours, whilst administrators must inform contributors within the same timeframe.
Contributions that cannot be credited within 48 hours must be returned to originating accounts, according to the guidelines.
Foreign currency contributions will be pooled into dedicated Dollar Funds managed by PFAs, with investments focused primarily on dollar-denominated instruments including Eurobonds, supranational bonds, and Federal Government-backed securities.
The commission permits naira-denominated asset investments provided they include currency risk hedging through Central Bank of Nigeria-approved instruments such as futures or swaps.
To minimise default exposure, PenCom has established strict credit rating and concentration limits. The guidelines restrict AAA-rated corporate foreign bond investments to five per cent of fund assets, whilst BBB-rated instrument investments face a one per cent ceiling.
Tax incentives apply to contributions and returns held for minimum five-year periods, though early withdrawals attract penalties that custodians must remit to relevant tax authorities within 21 days.
PenCom requires administrators to submit daily and monthly reports detailing contributions, withdrawals, and portfolio valuations in both dollars and naira currencies.
The Nigeria Financial Intelligence Unit will monitor compliance through the $10,000 reporting threshold, enhancing regulatory visibility over foreign currency inflows into the pension sector.
“This framework is not only about broadening participation in the CPS but also about ensuring integrity, transparency, and security of pension contributions in foreign currency,” PenCom emphasised in the guidelines.
The new regulations take immediate effect, with all qualifying pension administrators and custodians required to implement the reporting mechanisms forthwith.
