Emerging & Frontier Capital (EFC) has said that the new minimum capital requirements introduced by the National Pension Commission (PenCom) for Pension Fund Administrators (PFAs) are rational and designed to encourage industry consolidation, but warned that they could weaken the sector’s overall return profile.
In a new report assessing the implications of the capital policy, EFC noted that while the regulations raise the barrier for entry into Nigeria’s pension industry, they may also make it harder for existing PFAs to sustain investor returns and dividend payouts in the long run.
“We believe that PenCom’s new capital requirements are logical as they raise the barrier for entry and encourage consolidation. However, they also threaten the sector’s return profile,” the firm said.