The Central Bank of Nigeria (CBN) has increased the tenure of the Managing Director/Chief Executive of Deposit Money Banks to a maximum of 12 years.
The new tenure of 12 years is an increase of two years when compared to the 10 years contained in the previous corporate governance guidelines.
The increase is containes in a circular on the new, “Corporate Governance Guidelines for Commercial, Merchant, Non-interest and Payment Service Banks in Nigeria.”
The circular dated July 13, 2023, was signed by CBN Director, Financial Policy and Regulation Department, Chibuzo Efobi, and addressed to commercial, merchant, non-interest, Payment Service Banks and Financial Holding Companies
Also, the central bank increased the tenure of Deputy Managing Director (DMD/Executive Director (ED) of a bank to a maximum period of 12 years.
The CBN stated that the objectives of the guidelines are to among other things provide additional guidance on the principles, recommended practices, and responsibilities contained in NCCG 2018; outline industry-specific corporate governance standards for banks; and promote high ethical standards amongst operators, while enhancing public confidence.
Also, in line with the Nigeria Code of Corporate Governance (NCCG) 2018, the apex bank further stipulated that no board of a bank shall consist of only one gender.
In a bid to achieve gender diversity and promote a gender inclusive board, it said banks must take a practical approach to women’s economic empowerment in line with Principle 4 of the Nigerian Sustainable Banking Principles (NSBP).
The apex bank explained that the guidelines followed the pronouncement of the Financial Reporting Council of Nigeria (FRCN) for sector regulators to issue sector-specific guidelines on corporate governance for institutions under their regulatory purview.
The CBN therefore, adapted the principles and recommended practices of NCCG 2018 in developing the new guidelines for affected entities, taking into account, the peculiarities of the sub-sectors.
The central bank said the regulation was issued pursuant to the provisions of Section 2(d) of the CBN Act 2007, and Sections 56(2) and 67(1) of the Banks and Other Financial Institutions Act (BOFIA 2020).
Specifically, the regulation noted that where an ED becomes a DMD, a cumulative tenure of 12 years applies and shall not be extended.
Also, Non-Executive Directors (NEDs) (with the exception of Independent NEDs) of a bank must serve for a maximum of 12 years comprising three terms of four years each.
The CBN stressed that to qualify as a NED in a bank, the proposed NED shall not be an employee of a financial institution except where the bank is promoted by that financial institution and the proposed NED is representing the interest of that financial institution.
The guidelines further stated that an executive (ED, DMD or MD/CEO) who exits from the board of a bank either upon or prior to the expiration of his/her maximum tenure, must serve out a cooling period of two years before being eligible for appointment as a NED in the same bank.