Corporate Governance in Nigeria is Evolving


Corporate Governance in Nigeria is Evolving Ethical Boardroom By Soji Apampa, Co-founder of The Convention on Business Integrity – Nigeria



In a speech chronicling what went wrong in the Nigerian banking industry in 2009, former governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi said that “Governance malpractice within banks, unchecked at consolidation, became a way of life in large parts of the sector, enriching a few at the expense of many depositors and investors. Corporate governance in many banks failed because boards ignored these practices …” Have Nigerian companies ceased the practice of selecting board members mainly on political considerations such as an ability to influence government policy in favour of the company? Is Corporate Governance in Nigeria now ensuring true board effectiveness and independence? Have board selection criteria and system for board performance evaluation improved?

Some progress has been made in Nigeria’s regulatory competence evinced by the Nigerian Securities & Exchange Commission’s (SEC) recent handling of a whistle blow by an employee of ETI, holding company of the Ecobank Group, with a footprint in 34 countries across West, Central and East Africa. The whistleblower alleged insider dealing and bypassing of governance structures. The regulator acted by engaging the board and management, and instituting investigations to ascertain the veracity and extent of the alleged breaches.  SEC’s actions led to remedial action by ETI including the CEO agreeing to pass up on his $1.14million bonus for 2012 and the convening of an Extraordinary General Meeting (EGM) to deliberate upon and pass resolutions on the critical findings and recommendations of the corporate governance audit.

In Nigeria, as with the rest of the world, high-profile corporate scandals generated increased interest in corporate governance. Internationally, this led to the propagation of corporate governance laws like the Sarbanes-Oxley act in the United States in 2002.  Nigeria followed suit, the Bankers’ Committee issued a voluntary Code of Corporate Governance for Banks and other Financial Institutions in Nigeria in August 2003. Similarly in the same year, Nigeria’s Securities and Exchange Commission (SEC) released the Code of Best Practices on Corporate Governance. These codes sought to fill gaps in Corporate Governance practices that the extant company law, the Companies and Allied Matters Act of 1999 did not fill.


“Why did Nigeria keep experiencing these corporate governance failures in spite of new corporate governance codes”


A major fillip for corporate governance in Nigeria was the consolidation of Nigerian banks in 2005, an exercise that saw nearly 80 banks initially become 25 mega banks in order to attain a minimum capital base of approximately 25billion naira or $250miilion (before further consolidation and growth in their capital bases). In response to the unique governance challenges that the new size of banks, and process of mergers and acquisitions brought, the CBN issued in 2006, a mandatory corporate governance code for Nigerian banks. The insurance and pension regulators soon followed suit with corporate governance codes for their respective Industries.

Besides the impetus that the introduction of various regulatory codes provided, socio-economic factors also necessitated improvements in corporate governance.  Nigeria’s growing economic fortunes, at least for the middle class led to increased awareness and activism from stakeholder groups. Also, there has been a proliferation of business membership organisations that promote corporate governance among their members. Furthermore Nigerian companies are becoming international players in both their operations and sourcing of capital. Hence, for this class of companies at least, the need to meet listing requirements of foreign exchanges and appeal to international investors has elevated the pertinence of corporate governance in Nigeria. As of today, one can assert that “corporate governance” is more mainstream even as more sectorial regulators are developing codes of corporate governance. For example, In March 2014, The Nigerian Communications Commission (NCC) released the Code for corporate governance in the telecommunications industry however; the emerging challenge is for harmonisation of the standards to evolve a clear set of shared standards of corporate governance that stakeholders could hold companies to in Nigeria.

Despite the progress made, in 2009 the CBN had to inject funds and replace the leadership of 8 Nigerian banks that had eroded their capital as a result of having a huge portfolio of non-performing loans, mostly due to related party transactions involving management and board members through special vehicle loan schemes. This set of bank failures was reminiscent of pre-consolidation bank failures that were attributed to weak regulation and to the bank failures of the 1990s.  Why did Nigeria keep experiencing these corporate governance failures in spite of new corporate governance codes?

Corporate Governance was largely defined in terms of ticking off a series of rules on a checklist and yet the systemic problems seemed to stem from weak integrity, poor respect by directors of their fiduciary responsibilities, poor alignment of corporate governance with a system of effective incentives and sanctions. This has been recognised by the Nigerian Stock Exchange (NSE), which is making sound corporate governance (along with capitalisation and liquidity factors) a prerequisite for listing on its forthcoming Premium Board (and an incentive for the large players). It is also creating a tradable Corporate Governance Index, which should soon make the quality of governance of companies listed on the exchange more transparent to stakeholders (and provide a way to reward consistently compliant companies and punish the consistently deviant).

The Convention on Business Integrity in partnership with the NSE has developed a Corporate Governance Rating System (CGRS) for Nigeria, which is currently being piloted. The results of the pilot and announcement of the mandatory roll out of the CGRS to all listed companies is set to be made September 15, 2014 at a ceremony in Lagos, Nigeria. The CGRS score will consist of a score for verified compliance self-assessments by companies (50%), a Fiduciary Awareness Certification Testing (FACT) of directors (10%) and feedback from stratified, random sample of stakeholders (20%) and an Expert Multi-Stakeholder Group (EMSG – 20%), Companies would have to meet a 70% threshold to be considered for listing on the Premium Board.


Soji Apampa is the co-founder of The Convention on Business Integrity, which sponsors the Corporate Governance Rating System in partnership with the Nigerian Stock Exchange. Email: