In a move to strengthen corporate governance in Nigeria’s banking sector, the Central Bank of Nigeria (CBN) has approved a new code that limits the tenure of a bank’s managing director or CEO to a maximum of 12 years.
In a circular that Chibuzo Efobi, the department’s director of financial policy and regulation, signed today, the CBN made the announcement.
Previously, the CBN had set a cumulative tenure limit of 20 years for executives across the banking sector. However, the new code supersedes all previous regulations on corporate governance issued by the CBN and will be effective on August 1, 2023.
Under the new code, the tenure of deputy managing directors and executive directors is also limited to 12 years. The CBN emphasized that when an executive director becomes a deputy managing director, the cumulative tenure of 12 years applies and cannot be extended.
Furthermore, the code specifies that commercial, merchant, and non-interest banks must have a minimum of seven and a maximum of 15 directors on their boards. Payment service banks, on the other hand, must have a minimum of seven and a maximum of 13 directors.
The CBN emphasized that the remuneration of MD/CEOs, DMDs, and EDs should be linked to performance and structured to prevent excessive risk-taking. The board of each bank is responsible for appointing the MD/CEO, executive directors, and senior management staff.
In addition, the new policy limits the number of extended family members on a bank’s board to a maximum of two. Only one member of an extended family can occupy the position of MD/CEO, chairman, or ED at any given time.
This new code aims to enhance transparency, accountability, and good corporate governance practices within Nigeria’s banking industry. The CBN has directed banks and financial holding companies to adhere to the responsibilities outlined in the new rules.