The Central Bank of Nigeria (CBN) regulates and
oversees corporate governance in the Nigerian banking sector. According to the
CBN Corporate Governance Code, corporate governance refers to the processes and
structures by which the business and affairs of an institution are directed and
managed, in order to improve long term shareholder value by enhancing corporate
performance and accountability, while taking into account the interest of other
stakeholders. Corporate governance is therefore about building credibility,
ensuring transparency and accountability as well as maintaining an effective
channel of information disclosure that would foster good corporate performance.
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The Code of Corporate Governance for Banks and
Other Financial Institutions in Nigeria is explicit in its recommendations on
best practice, including constituting an effective board and identifying the
principal responsibilities of the Board, remuneration of directors, Board
performance assessment and the Audit Committee. The Code also considers factors
relevant to depositor and investor confidence given the importance of these
stakeholders to the stability of the financial sector.
Highlights of the Central Bank of Nigeria Code of
Corporate Governance include:
(1)
The Bank’s
Board of Directors should meet regularly, at least 4 regular meetings in a
financial year.
(2)
There
should be adequate notice for all Board meetings, as specified in the Memorandum
and Articles of Association.
(3)
The MD/CEO
(Head of management) and Chairman (Head of the Board) should be separate.
(4)
No two
members of the same extended family should occupy the position of Chairman and
CEO/Executive Director of a bank at the same time.
(5)
Government
direct and indirect equity holding in any bank shall be limited to 10%. An
equity holding of above 10% by any investor is subject to CBN’s prior approval.
(6)
The
number of non-executive board directors should be more than that of executive
directors subject to a maximum board size of 20 directors.
(7)
A
committee of non-executive directors should determine the remuneration of
executive directors.
(8)
Non-executive
directors should not remain on the board of a bank continuously for more than 3
terms of 4 years each (12 years).
(9)
When
board directors and companies/entities/persons related to them are engaged as
service providers or suppliers to the bank, full disclosure of such interests
should be made to the CBN.
(10)The Board Credit Committee should have neither the
Chairman of the Board nor the Managing Director as its chairman.
(11)Internal auditors should be largely independent and be
a member of a relevant professional body
Poor corporate governance has been identified as one of the major factors in
virtually all known instances of
financial sector distress. It is therefore crucial that financial institutions observe a strong corporate governance ethos.
It
should be emphasised that good corporate governance rests ultimately with the
Board of Directors. In identifying that
good corporate governance hinges on Board competence and integrity, it should
be realised that standards of probity and fiduciary responsibility in the wider
business environment are equally critical.
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