Emerging & Frontier Capital (EFC) has warned that the National Pension Commission’s (PenCom) new capital rules for Pension Fund Administrators (PFAs) could hurt profitability, even as they promote consolidation and stability in the industry.

PenCom recently raised the minimum capital requirement from ₦5 billion to ₦20 billion for PFAs with Assets Under Management (AUM) below ₦500 billion, and ₦20 billion plus 1% of AUM above ₦500 billion for larger firms. Operators must comply by December 31, 2026.

EFC described the policy as logical but cautioned that it could sharply reduce returns and dividend payouts. The firm estimated that a ₦5 billion investment with a 10-year internal rate of return (IRR) of 34.2% could now yield just 3.6%, while a ₦20 billion investment might post a negative IRR of -8.3%.

The report also projected that returns for top operators like Stanbic IBTC Pensions and Access ARM Pensions could fall by up to 20 percentage points by 2031.

EFC suggested that PenCom adopt AUM-based requirements and encourage PFAs to list on the stock exchange to improve transparency and allow contributors to benefit through dividends.

Despite profitability concerns, the firm said the reforms would likely streamline the industry and improve efficiency over time.

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