By Daniel Edu

The Central Bank of Nigeria (CBN) has announced an increase in the maximum tenure for Managing Directors/Chief Executives of banks from 10 years to 12 years. This update was provided in a circular titled “Corporate Governance Guidelines for Commercial, Merchant, Non-interest, and Payment Service Banks in Nigeria” issued on July 13, 2023.

According to the circular signed by CBN Director, Chibuzo Efobi, the new guidelines aim to offer additional guidance on corporate governance principles, recommended practices, and responsibilities as outlined in the NCCG 2018. The guidelines also emphasize industry-specific corporate governance standards for banks, promoting high ethical standards and enhancing public confidence.

In line with the Nigeria Code of Corporate Governance (NCCG) 2018, the CBN has mandated that no bank board should consist of only one gender. The directive aims to promote gender diversity and inclusivity on boards, aligned with the Nigerian Sustainable Banking Principles (NSBP) and the principle of women’s economic empowerment.

The CBN has adopted the principles and practices of the NCCG 2018 while considering the unique characteristics of the banking sub-sector. The issuance of these guidelines is in compliance with the Financial Reporting Council of Nigeria’s directive for sector regulators to develop sector-specific corporate governance guidelines.

The regulation applies to Executive Directors (ED), Deputy Managing Directors (DMD), and Managing Directors/Chief Executive Officers (MD/CEO). It stipulates that EDs who become DMDs are subject to a cumulative tenure of 12 years, and their tenure shall not be extended. Non-Executive Directors (NEDs), excluding Independent NEDs, are allowed a maximum of 12 years, comprising three terms of four years each.

The regulation also includes cooling-off periods for executives who exit the board of a bank, whether upon or prior to the expiration of their maximum tenure. Additionally, the cumulative tenure limit for directors (ED, DMD, MD, and NEDs) on the board of the same bank is set at 24 years, calculated from the date of their initial appointment.

Other provisions in the guidelines require banks to disclose a summary of their risk management policies in their annual financial statements. For publicly quoted banks, this summary should be made available on their website. The guidelines also establish specific requirements for Non-Executive Directors in Financial Holding Companies (FHCs), including a maximum tenure of three terms of four years each.

Overall, these guidelines aim to strengthen corporate governance practices in the banking sector and ensure transparency, accountability, and sustainability within financial institutions.