Nigeria’s approach to new governance


Nigeria’s approach to new governance Ethical BoardroomBy Victor Banjo – Corporate Governance and Board Effectiveness Consultant



The journey for the Nigerian Code of Corporate Governance (NCCG 2018) has been long and arduous for the Financial Reporting Council of Nigeria (FRC), sectoral regulators and regulated businesses.

In June 2020, the FRC released additional clarification on reporting in compliance with the NCCG 2018. In a statement, the FRC explained that it had been engaging with all sectoral regulators for the purpose of developing sectoral guidelines of corporate governance on specific requirements relevant to each sector, which are not covered under NCCG 2018. The FRC noted that, after development, the ‘sectoral guidelines would be released once the engagement with sectoral regulators is completed’.

In this significant pronouncement, the FRC said that the process of engaging with sector regulators was important because, according to the council, ‘all existing sectoral codes of corporate governance are to be withdrawn, and sectoral guidelines of corporate governance will be issued to address sector-specific matters or requirements on corporate governance’.

For the avoidance of any doubt, the FRC stated that: “To this end, NCCG 2018 as the national code would be the only code of corporate governance in Nigeria.”

The enabling FRC Act mandates that ‘all public companies (whether a listed company or not; all private companies; all concessioned or privatised companies; and all regulated private companies that file returns to any regulatory authority other than the Federal Inland Revenue Service (FIRS) and the Corporate Affairs Commission (CAC)’ report on the application of the code in their annual reports for financial years ending after 1 January 2020.

How did we get to this point? In line with my prediction, the new Nigerian Corporate Governance Code 2018, developed by the FRC, was unveiled to stakeholders in Abuja, the Nigerian capital, on 15 January 2019, by the vice president of the Federal Republic of Nigeria, Yemi Osinbajo, an erudite professor of law and the Honourable Minister of Industry, Trade and Investment, Dr Okechukwu Enelamah, a highly respected investment banker. The code operates on the ‘apply and explain’ philosophy. This is to ensure that all principles are applied, without exceptions. The ‘apply and explain’ philosophy is hinged on:

■ Applying the principles 

All principles are ideals that companies should strive for in their governance journey. The principles are basic and fundamental to good governance, and application of the principles is therefore assumed.

■ Explaining the practices 

Companies should provide explanations for the recommended practices that have been implemented or how these or other practices implemented have delivered the expected outcomes of the principles.

‘Effective corporate governance systems prevent abuse of the power that shareholders have granted to directors and managers who represent their interests’

In a clear departure from the controversial code issued under the previous Financial Reporting Council (FRC) leadership, companies that are not covered by this Code are encouraged to apply these principles to enhance their competitiveness and sustainability. Companies were required to begin reporting on the application of the FRC Code in their annual report, starting in financial years ending on or before 1 January 2020. The new Code contains 28 principles as the core of the code and practices which are recommended to enable flexibility in different regulators and companies implementing the principles.

How did organisations prepare for implementation of NCCG 2018? Several months before the FRC Code was unveiled, I was asked by a major, fast-moving consumer goods company to carry out a review of the corporate governance structure and processes in the organisation with, specific reference to, and in line with, acceptable standards of corporate governance in the country. The brief stated that the process review should be carried out with reference to the Securities Exchange Commission (SEC) corporate governance code (2011) and the then recently released draft Financial Reporting Council corporate governance code. The organisation wanted an appraisal of the composition and structure of the board in line with standard corporate governance practice and the above-mentioned codes.

The brief from the consumer goods company asked for an appraisal of the organisation’s current audit committee, its functions, structure and charter, also in line with best practices and the above-mentioned codes. I was asked to provide advice on the requirements and needs for other board committees or otherwise in addition to the existing audit committee, for the type of business they run, functions, necessity and in line with best corporate governance practice. The leadership of the organisation needed advice on the preparation of a board charter and applicable guidelines in line with standard corporate governance practice and codes. They were equally concerned about their internal corporate governance controls.

Why the sudden interest in detailed adherence to the tenets of good corporate governance? Good businesses wanted to be prepared. In the process, I reviewed the level of alignment of the organisation with the FRC Code and discovered that they met 23 out of the 28 FRC Code Principles.

The areas that required attention were:

Nigeria’s approach to new governance Ethical Boardroom

I then set out a comprehensive plan for the alignment of the company’s processes with the recommended 230 practices to ensure the organisation’s readiness for compliance with the FRC Code. Was the review necessary? Adoption of good corporate governance practices enhance operational and financial performance of an organisation, mitigate risk, and safeguard against mismanagement.

As directors become involved in the strategic direction of the enterprise, they require new skills and capabilities to make impact in the boardroom.

You may recall that the collapse of global financial markets in September 2008 ignited a debate on what caused the demise of many well-known organisations. At the time, many commentators agreed that poor corporate governance was one of the forces to blame. How? Poor adherence allowed the transparency, accountability and integrity of companies to be compromised and for abuses to go unchecked, particularly on matters of corruption.

Effective corporate governance systems prevent abuse of the power that shareholders have granted to directors and managers who represent their interests. The release of the draft FRC Code made many organisations to start asking how aligned they were with the 28 principles of the Financial Reporting Council Corporate Governance Code and SEC Corporate Governance Code (2011).

Knowing that good corporate governance is the anchor for sustainable growth, I recommend the International Finance Corporation (IFC) corporate governance board leadership development programme toolkit for all directors. The curriculum, which is in four parts, covers (1) corporate governance (2) board effectiveness (3) strategic leadership (4) financial stewardship and accountability. Adoption of this framework can help companies enhance operational and financial performance, mitigate risk, safeguard against mismanagement and help them attract new investments and capital to finance their growth. With no significant corporate governance breaches reported – to date, we may have started seeing the value the new FRC Code brings to the way organisations are managed in Nigeria.


About The Author:

Victor Banjo is the Chief Executive of Omari Consulting, a corporate governance and board advisory firm in Lagos, Nigeria. He previously served as Director General of the Institute of Directors Nigeria, member of the Governing Board of the Centre for Corporate Governance and ExCo member of the African Corporate Governance Network. He is certified by the International Finance Corporation as a Trainer on the Corporate Governance Board Leadership Resources and Building Director Training Organisations toolkits. A seasoned policy analyst, he regularly facilitates board and senior management strategy sessions. He has written over twenty articles in journals and other online publications.