The Central Bank of Nigeria (CBN) has issued new guidelines on corporate governance for banks in the country. The guidelines include increasing the tenure of the Managing Director/Chief Executive and Deputy Managing Director/Executive Director of banks from 10 years to a maximum of 12 years. The objective is to provide additional guidance on corporate governance principles, promote high ethical standards, and enhance public confidence.
The CBN also emphasized the importance of gender diversity on bank boards and stated that no board should consist of only one gender. Banks are expected to promote gender inclusion and women’s economic empowerment in line with the Nigerian Sustainable Banking Principles.
The guidelines were developed based on the Nigeria Code of Corporate Governance (NCCG) 2018, and they take into account the specific characteristics of the banking sector. The regulation is issued in accordance with the CBN Act 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020.
The guidelines also set limits on the tenure of Non-Executive Directors (NEDs) and Independent Non-Executive Directors (INEDs). NEDs (excluding Independent NEDs) can serve a maximum of three terms of four years each, totaling 12 years. INEDs have a term of office of four years, renewable once for another consecutive term of four years.
The regulation includes cooling-off periods for executives who exit from the board of a bank, and it specifies that directors (ED, DMD, MD, and NEDs) on the same bank’s board have a cumulative tenure limit of 24 years. Banks are also required to disclose a summary of their risk management policies in their annual financial statements.
For Financial Holding Companies (FHCs), NEDs (including the Chairman) serve a maximum of three terms of four years each. The cumulative tenure limit for NEDs in an FHC or any other FHC is 12 years. INEDs in an FHC are required to have sound knowledge of the operations, laws, and regulations relevant to the business of its subsidiaries.
Overall, these guidelines aim to enhance corporate governance standards, promote diversity, and strengthen the banking sector in Nigeria.