Reps to Curb Risky Trust Investments, Propose 20% Cap on Single-Issuer Exposure

The House of Representatives has proposed a 20 per cent investment cap on exposure to a single issuer, alongside tougher accountability measures, in a major legislative push to protect trust funds from excessive investment risks and financial losses.

The proposal is contained in the Trustee Investment Bill, 2026 (HB 2762), which seeks to repeal and re-enact the existing Trustee Investment Act of 1957 to reflect developments in Nigeria’s financial markets and strengthen safeguards for beneficiaries.

Chairman of the House Committee on Capital Market and Institutions, Hon. Solomon T. Bob, disclosed this on Monday at a public hearing on the bill at the National Assembly, Abuja.

Bob described the proposed investment ceiling as a critical safeguard against excessive concentration of trust assets, explaining that limiting exposure to a single issuer would reduce the risk of beneficiaries losing substantial portions of their investments if one institution encounters financial difficulties.

He said Nigeria’s existing trustee investment law, enacted in 1957, had become outdated and inadequate for a financial system that has witnessed significant expansion and the emergence of sophisticated investment opportunities.

“Today, we have a sophisticated capital market worth over N80 trillion, pension assets over N30 trillion, and new asset classes from REITs to Infrastructure Funds to Green Bonds. The world has moved. Our law has not. This hearing is to correct that,” he said.

Under Clause 3 of the proposed legislation, trustees would be permitted to invest in a broader range of financial instruments, including corporate bonds, equities, collective investment schemes, Exchange Traded Funds (ETFs), Real Estate Investment Trusts (REITs), infrastructure funds, real property, foreign investments through licensed custodians, private equity, regulated virtual assets and environmental, social and governance (ESG)-compliant bonds.

However, Clause 4 proposes that investments in a single issuer must not exceed 20 per cent of a trust portfolio, a measure intended to promote diversification and minimise concentration risks.

The bill also seeks to strengthen trustees’ fiduciary responsibilities by expressly incorporating the principles of loyalty, prudence, care and impartiality under Clause 5.

Under the proposed provision, trustees would be required to act in the best interests of beneficiaries and exercise the level of care and prudence expected of individuals managing their own financial affairs.

Clause 6 further provides for the delegation of certain investment responsibilities to professionals, including fund managers and custodians, while retaining trustees’ responsibility for their appointment, supervision and performance.

On transparency, Clauses 7 and 8 would introduce requirements for fair valuation of trust assets and annual reporting to beneficiaries, ensuring that those whose assets are being managed have access to information about their investments and performance.

The proposed law also seeks to prohibit speculative dealings, futures contracts and investments in unregulated schemes under Clause 10.

Additionally, Clause 11 would empower the Minister of Finance, in consultation with the Securities and Exchange Commission (SEC) and other relevant regulatory authorities, to issue regulations necessary for implementing the legislation and responding to emerging developments in the financial market.

Bob explained that the committee invited 12 key institutions involved in the management, regulation and advocacy of trust assets to contribute to the legislative process.

They included the Ministries of Justice and Finance, SEC, National Pension Commission, Debt Management Office, Nigeria Deposit Insurance Corporation, financial market operators, estate administrators and civil society organisations.

However, the committee chairman expressed disappointment over what he described as the poor attendance of invited institutions, revealing that only three of the approximately 12 organisations attended the hearing.

The Securities and Exchange Commission, Debt Management Office and Association of Corporate Trustees were the only institutions represented. They made submissions and offered recommendations on the proposed legislation.

Bob criticised the absence of other invited agencies, stressing that their participation was important to ensuring that the proposed law reflected the operational realities of the financial sector and adequately protected beneficiaries.

He warned that legislative engagement must not be treated lightly, noting that lawmaking remains central to translating policy proposals, advocacy and reform initiatives into meaningful changes capable of improving Nigerians’ lives.

According to him, efforts to address national challenges would amount to “blowing hot air” if lawmaking was not placed at the centre of the process.
The committee chairman disclosed that eight memoranda had been received ahead of the hearing and urged stakeholders to provide further technical recommendations, particularly on the proposed 20 per cent investment ceiling, the suitability of the expanded investment categories and whether higher-risk assets should attract lower exposure limits.

Other issues identified for consideration included the strength of the proposed fiduciary obligations, the need for an explicit ESG duty, the distinction between small family trusts and large institutional trusts, and possible conflicts between the proposed law and existing SEC and PENCOM regulations.

He assured participants that all submissions would receive objective consideration, emphasising that the protection of ordinary beneficiaries must remain central to the legislative process.
“The widow in Sokoto whose husband left N2 million in trust deserves same protection as billion-naira pension fund,” he said.

ABBAS: OUTDATED 1957 LAW MUST GIVE WAY TO MODERN FRAMEWORK
In his remarks, Speaker of the House of Representatives, Rt. Hon. Abbas Tajudeen, called for a comprehensive overhaul of Nigeria’s trustee investment framework, describing the existing law as inadequate to regulate the country’s evolving financial and capital markets.

Abbas, who was represented by Hon. Dahiru Abubakar Sarki, representing Lafia/Obi Federal Constituency of Nasarawa State, said the proposed legislation offered an opportunity to establish a modern legal framework that would expand investment opportunities while strengthening the protection of trust assets and beneficiaries.

He noted that the financial landscape had changed considerably since the enactment of the 1957 Act, with the emergence of sophisticated financial instruments and new investment opportunities making legislative reform both necessary and timely.

The Speaker stressed that trustee investment went beyond financial management, as it involved protecting family wealth, preserving property and safeguarding the financial future of individuals and institutions.

“Behind every trust may be the inheritance of a child, the security of a widow, the resources of a charitable institution or the accumulated wealth of a family. The law must ensure that these interests are adequately protected,” he said.

Abbas, however, cautioned against creating an excessively restrictive investment framework that could deny beneficiaries legitimate opportunities for wealth creation.

He maintained that the proposed reforms must strike a balance between protecting trust assets and allowing trustees to generate reasonable returns, warning that inadequate regulation could expose beneficiaries to imprudent investment decisions and avoidable financial losses.

“The challenge is to strike the right balance between preserving trust assets and enabling reasonable returns on investment. An excessively restrictive framework may deny beneficiaries legitimate opportunities for growth, while an inadequately regulated one may expose their assets to imprudent decisions and avoidable risks,” he said.

The Speaker insisted that expanding investment opportunities must go hand in hand with stronger safeguards, clearly defined fiduciary responsibilities, effective risk management and appropriate regulatory oversight.

He warned trustees against using the proposed investment flexibility as an excuse for reckless financial decisions, stressing that trust assets must never be treated as personal property.

“The governing principle must remain unmistakable: trustees hold assets for the benefit of others, not for their personal advantage. Their decisions must therefore be guided by prudence, integrity, transparency and an overriding commitment to the interests of beneficiaries,” he said.

He further cautioned that modernisation must not become a justification for exposing trust property to unreasonable risks.

Beyond beneficiary protection, Abbas said the proposed legislation could contribute to Nigeria’s economic development by mobilising long-term domestic capital for infrastructure, productive investments and enterprise growth.

He noted that a credible trustee investment framework could deepen the capital market and improve the mobilisation of domestic resources needed to address the country’s infrastructure deficit.

However, he maintained that economic development objectives must not override the rights and financial security of beneficiaries.

Abbas urged stakeholders to focus their contributions on investment categories, diversification requirements, fiduciary obligations, professional delegation, regulatory oversight and beneficiary protection.

He said the objective should be to produce legislation that is contemporary, practical, enforceable and capable of standing the test of time.

The Speaker reaffirmed the commitment of the 10th House of Representatives to strengthening Nigeria’s legal and institutional framework through rigorous legislative scrutiny, informed debate and meaningful stakeholder engagement.

He commended the bill’s sponsor and the Committee on Capital Market and Institutions for advancing the reform process, assuring stakeholders that their submissions would receive the attention they deserved.

According to him, the success of the proposed legislation should ultimately be measured by its ability to inspire confidence, protect assets and deliver lasting value to beneficiaries.

“Ultimately, the success of this reform should be measured not simply by the investment opportunities it creates, but by the confidence it inspires, the assets it protects and the lasting value it delivers to beneficiaries,” he said.