On the 13th of July 2023, the Central Bank of Nigeria (CBN) issued a circular with respect to the Corporate Governance Guidelines for Commercial, Merchant, Non-Interest and Payment Service Banks, as well as Financial Holding Companies in Nigeria (new Guidelines) with an effective date of 1st August 2023.
The new Guidelines seeks to provides additional guidance to the Nigerian Code of Corporate Governance 2018, define the expected corporate governance standards for banks and enthrone ethical practices amongst operators whilst enhancing public confidence.
The CBN had taken into consideration the provisions of the Nigerian Code of Corporate Governance 2018 (NCCG 2018), global best practices and previously issued codes, circulars, and directives of the CBN in drafting the guidelines. The new Guidelines supersedes all previous codes, circulars and related directives on corporate governance issued by the CBN.
In this edition of our publication, we have highlighted the key variations from the Code of Corporate Governance for Banks & Discount Houses (which the new Guidelines now supersedes) and innovations introduced by the guidelines.
- Board Structure and Composition:
- Under the new Guidelines, Commercial, Merchant and Non-Interest Banks (CMNIBs) are required to maintain a minimum of seven (7) Directors and maximum of fifteen (15) Directors, while Payment Service Banks (PSB) must have a minimum of seven (7) Directors and a maximum of thirteen (13) Directors. This is a complete departure from the stipulation of the previous code which provided for a minimum of five (5) Directors and a maximum of twenty (20) Directors.
- The structure of the Board under the previous code was required to include a minimum of two (2) Independent Non-Executive Directors (INED), however under the new guidelines, the Board of Commercial Banks with international and national authorization, Merchant Banks and Non-interest Banks with national authorization must constitute at least three Independent Non-Executive Directors while Payment Service Banks, Commercial Banks with regional authorization and Non Interest Banks (NIBs) with regional authorization shall have at least two Independent Non-Executive Directors(INED).
- At least, two (2) Non-Executive Directors, one being an Independent Non-Executive Director, must have requisite knowledge in Innovative Financial Technology, Information Communication Technology (ICT) and/or Cyber Security.
- In achieving gender diversity and promoting gender inclusion on the Board, Banks are mandated to take practical approach to women empowerment in line with Principle 4 of the Nigerian Sustainable Banking Principles.
- Directors resigning from the Board must submit a written notice of resignation to the Board Chairman at least ninety (90) days before the effective date of resignation. In the event that the resigning Director is an INED, and such resignation will result in non-compliance with the requirement on minimum number of INEDs on the Board, the Board shall ensure that a replacement is appointed within the ninety (90) days’ notice period. Also, where the resignation of a NED would result to majority of the Board being Executive Directors, the Board shall ensure a replacement is appointed within the ninety (90) days’ notice period.
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Read the original publication at Jackson, Etti & Edu.