Harmonised Code of Corporate Governance for Private Sector in Nigeria, 2016: Highlights and salient provisions

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A milestone has been achieved in Nigeria’s Corporate Governance landscape with the commencement of the much anticipated National Code of Corporate Governance from October 17, 2016. The commencement is coming almost three years later than the originally planned date – January, 2014. According to The Financial Reporting Council of Nigeria (FRC), the Code of Corporate governance for private sector would be applicable on a mandatory basis whilst that for Non-profit organisations would be applicable on a ‘comply or justify non-compliance’ basis.

The Council further noted that the Code of Governance for Public sector would not be applicable until and executive directive is obtained from the Federal Government of Nigeria. The reason given for this is that there is a form of governance structure for government establishments under their enabling statutes thus there will be need to align these existing provisions with that of the Code through a legislative instrument. Copies of the various Codes are available here:

Private sector code private-sector-code-2016

Public sector code public-sector-code-amended-final-23-jan-2016

Non-profit sector code nfpo-code-2016

The Code of Corporate Governance for Private Sector has harmonised the various sector codes previously in existence. These are the Code of Corporate Governance for Banks in Nigeria Post-Consolidation, 2006, Code of Corporate Governance for licensed Pension Operators 2008, Code of Corporate Governance for Insurance Industry in Nigeria 2009, Securities and Exchange Commission Code of Corporate Governance in Nigeria 2003, reviewed in 2011 and Central Bank of Nigeria Code of Corporate Governance for Banks and Discount Houses in Nigeria, 2014.

The new code is applicable to all public companies, whether listed or not; all private companies that are holding companies or subsidiaries of public companies and regulated private companies i.e. companies regulated by other regulatory body than the Corporate Affairs Commission and Federal Inland Revenue Service, for example Banks, Insurance companies, aviation companies, telecommunication companies, brokerage companies, etc. the code provides a minimum standard for corporate governance and compliance is mandatory.

Some highlights and salient features of the Code of Corporate Governance for Private Sector are as follows:

  • Prohibition of surreptitious influence or dominance of board or management by a board member after retirement;
  • Minimum of two-thirds of board members to be non-executive directors;
  • Separation of position of Chairman and CEO;
  • Prohibition of more than two members of the same or extended family from sitting on the same board;
  • Requirement for companies to establish diversity policy to include measurable objectives for achieving gender diversity;
  • Prohibition of MD/CEO from becoming Chairman except in exceptional cases where a cool off period of 7 years must be allowed among other requirements;
  • Disclosure of remuneration of executive directors in annual reports;
  • Prohibition of sitting allowances or directors’ fees of executive directors;
  • Requirement of annual meeting of independent directors only;
  • Reference to Institute of Directors’ database for potential candidates for independent non-executive directorships;
  • Annual declaration of independent status by independent non-executive director and disclosure of same in annual reports and company website;
  • Maximum of two terms of five years each for the position of MD/CEO;
  • Maximum of three terms of four years each for executive directors other than MD/CEO;
  • Maximum of three terms of four years each for non-executive directors;
  • Requirement for inclusion of borrowings and maturity dates in company annual reports;
  • Annual corporate governance evaluation by independent consultant registered by the regulator for this purpose report of which shall be sent to regulator, presented at company annual general meeting and also made available on investor’s portal of company;
  • Requirement for consideration of broad range of sustainability issues in relation to other stakeholders including issues relating to health, environment, safety, equality and diversity in employment, anti-corruption.
  • The new code which is to be enforced by the FRC and sectoral regulator, where applicable has no specific sanction for non-compliance though the code specifically states that non-compliance will attract sanctions for the company and person(s) directly involved in the infraction.
  • The code is expressed to supersede any corporate governance code in force before the date of its commencement.
  • In case of conflict with any sectoral guideline, the provisions of the code will prevail.


The effort of the Financial Reporting Council of Nigeria in providing a harmonized code for the three broad sectors of the economy is commendable. The harmonization has brought some form of standardization as far as corporate governance is concerned because the codes provide the minimum standard for these sectors. Thus, shareholders, donors, investors and all other stakeholders can have a fair overall idea of what to expect in Nigeria’s corporate governance regime.

However, the FRC, being the responsible body for enforcement of the codes, needs to live up to the responsibility of ensuring that the extensive provisions of these codes are implemented. To this end, it is necessary for the FRC to collaborate with the Corporate Affairs Commission as well as the Securities & Exchange Commission and the Nigerian Stock Exchange in order to effectively monitor entities within its dragnet and ensure compliance with the provisions of the code for private sector.

It is believed that if the proper enforcement mechanism is put in place, the code for private sector would foster transparency, integrity, board efficiency and improved corporate governance structures generally. It is however pertinent to note that the FRC needs to guard against the possibility of regulatory capture that could stem from over-regulation. Overall, better corporate governance in the private sector should provide some measure of confidence for investors which is critical for the development of the Nigerian economy.

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