The National Pension Commission (PenCom) has issued a new directive mandating all Pension Fund Administrators (PFAs) and Pension Fund Custodians to report any foreign currency pension contributions exceeding $10,000 to the Nigeria Financial Intelligence Unit (NFIU) within 24 hours of receipt.
The directive forms part of a newly released Guidelines on Foreign Currency Pension Contributions, published on PenCom’s official website on Tuesday. The framework is designed to extend the Contributory Pension Scheme (CPS) to Nigerians in the diaspora and residents earning in foreign currencies, while ensuring compliance with anti-money laundering standards and international financial regulations.
According to PenCom, the reporting requirement aligns with Section 3(1) of the Money Laundering (Prevention and Prohibition) Act 2022, which mandates financial institutions to report transactions above the $10,000 threshold. Submissions must include key details such as the sender’s name, address, the exact transfer amount, and the transaction purpose.
Additionally, PFAs and custodians must flag suspicious transactions below $10,000, in accordance with the Financial Intelligence Unit Act 2018.
“PFAs and custodians shall ensure that all foreign currency contributions exceeding $10,000 are reported to the NFIU within 24 hours, including the nature and amount of the transfer, sender’s details, and any other required information,” PenCom stated.
Expanded Eligibility for Foreign and Diaspora Workers
The guidelines open the door for a broader range of contributors, including:
- Nigerians living and working abroad;
- Nigerian and foreign employees in Nigeria who receive all or part of their salaries in foreign currency;
- Staff of foreign companies and international organisations operating within Nigeria.
To participate in the foreign currency pension scheme, contributors must provide valid identification, including a National Identification Number (NIN) or international passport, along with next-of-kin information. Expatriates working in Nigeria are also required to submit additional documentation.
All contributions must be made strictly in U.S. dollars, regardless of the original currency of earnings.
- Nigerians abroad are required to remit contributions via Non-Resident Nigerian Ordinary (NRNO) Accounts.
- Local contributors must use domiciliary accounts linked to registered custodial banks.
Each contributor must also pass comprehensive Know Your Customer (KYC) checks, in line with Nigeria’s anti-money laundering framework.
PenCom has imposed clear rules around how and when contributors can access their foreign currency pension savings:
- 60% of contributions can be accessed under limited, pre-retirement conditions;
- 40% must be preserved strictly for post-retirement use;
- Withdrawals are limited to two per year and can only begin after the initial contribution has been held for at least six months.
Additionally, PFAs and custodians are required to:
- Notify each other of contributions within 24 hours;
- Inform contributors within the same time frame;
- Return contributions to the originating account if not credited within 48 hours.
Creation of Dedicated Dollar Pension Fund
All foreign currency contributions will be pooled into a dedicated Dollar Fund, to be managed by PFAs. The fund will be invested primarily in:
- Dollar-denominated instruments (e.g., Eurobonds, supranational bonds);
- Federal Government-backed securities;
- Exchange-traded funds (ETFs).
While naira-based investments are permitted, PFAs must hedge currency risks using tools like futures and swaps, approved by the Central Bank of Nigeria (CBN). PenCom also introduced investment risk controls, including: a 5% limit on AAA-rated corporate foreign bonds and a 1% cap on BBB-rated instruments.
Contributors will enjoy tax-free status on their contributions and returns, provided the funds are held for a minimum of five years. Early withdrawals, however, will trigger tax penalties, which custodians must remit to the relevant tax authority within 21 days.
PFAs are required to submit daily and monthly reports to PenCom, detailing contributions, withdrawals, and asset valuations in both dollars and naira.
The new policy strengthens regulatory oversight of dollar inflows into Nigeria’s pension system, giving the NFIU greater visibility to track, analyze, and prevent the misuse of pension accounts for illicit financial flows.
For Nigerians earning abroad or in dollars, the framework offers a structured, regulated avenue to save for retirement in foreign currency, insulating long-term savings from exchange rate volatility.
For regulators, it marks a significant step toward aligning Nigeria’s pension system with global compliance standards, while expanding the asset base available to pension funds and enhancing financial transparency.
“This is not just about expanding participation in the CPS,” PenCom noted, “but also about reinforcing the integrity, transparency, and security of pension contributions made in foreign currency.”
Be the first to comment