i Legal and institutional framework

The Nigerian corporate governance (NCG) regime is characterised by a combination of statutory framework and subsidiary legislation enacted by the relevant regulatory authorities. These laws can be divided into two categories: the general laws and the sector-specific laws. While the general laws govern every entity incorporated in Nigeria, the sector-specific laws govern only companies that operate within the specific sector or industry.

The general laws are:

  1. the Companies and Allied Matters Act (CAMA),2 and the regulatory authority charged with responsibility of administering the CAMA is the Corporate Affairs Commission (CAC);3
  2. the Investments and Securities Act 2007 (ISA), which also established the Securities and Exchange Commission (SEC) as its regulatory authority; and
  3. the Financial Reporting Council of Nigeria Act 2011 (the FRCN Act),4 administered by the Financial Reporting Council of Nigeria (FRCN).

The sector-specific laws include among others, the Banks and Other Financial Institutions Act (BOFIA) and the Insurance Act (IA).5

The CAMA is the main statute delimiting the general framework for the NCG regime. It lays out the various types and forms of entities that can be incorporated, including private companies, which may be limited by shares or by guarantee, unlimited companies, and public companies limited by shares. The CAMA also outlines the structure, powers and duties of the various organs of a corporate entity as well as the systems of governance and management of the company, and management qualifications. On the other hand, the ISA sets out the statutory framework for regulation and operation of the Nigerian securities market. It outlines the operational rules for securities market operators, participants and stakeholders, and liquidity requirements, among other things.

The BOFIA is the principal statute that regulates the banking sector. It recognises the supervisory role of the Central Bank of Nigeria as enumerated under the Central Bank of Nigeria Act 2007. It states the conditions for the grant of a banking licence and revocation or variation of the same. Furthermore, the principal pieces of legislation governing insurance activities are the National Insurance Commission Act and the IA. The National Insurance Commission is empowered to make regulations and issue guidelines to insurance companies from time to time, while the IA applies to insurance businesses and regulates insurers, with the exception of insurance businesses carried on by friendly societies and by companies, bodies or persons established outside Nigeria, engaged solely in reinsurance transactions with an insurer authorised under the IA.

The NCG space has a number of corporate governance codes applicable to publicly listed companies and for sector-specific companies. The resultant effect of this is that in certain instances there is over-regulation, depending on the industry in which a company operates. For the purpose of this review, the focus is mainly on (1) the Securities and Exchange Commission Code of Corporate Governance for Public Companies 2011 (the SEC Code); and (2) the Code of Corporate Governance for Banks and Discount Houses, and the Guidelines for Whistle-Blowing 2014 (the Bank Code). However, there are also a number of corporate governance codes applicable to other sectors of the economy. These are: (1) the Nigerian Communications Commission Code of Corporate Governance for the Telecommunications Industry 2014, which applies to the telecommunications industry; (2) the National Insurance Commission Code of Good Corporate Governance for the Insurance Industry 2009, which applies to the insurance industry; and (3) the Pension Commission Code of Corporate Governance for Licensed Pension Operators 2008, which applies to the pension industry.

For corporate governance practitioners, the growth and advancement of Nigeria’s corporate governance has been slow but steady. Following the corporate scandals in 2008–2009, which practically brought the banking sector to a halt, the regulators seem to perceive corporate governance as the single most important solution to bring sanity in all areas of commerce and capitalism.


The NCG structure is bipartite, such that a company acts through the members in the general meeting and the board of directors. The board is primarily charged with the responsibility of managing the company, with further powers reserved for the members in general meeting. The interface between the board structure and practice and the role of directors is described in detail below.

i Board structure and practices

Nigerian companies operate a one-tier board structure where all the directors sit and make decisions as a single organ except where the functions of the board have been delegated to a committee of the board or to the managing director.

Every company is by the provisions of the CAMA required to have a minimum of two directors on its board and, where at any time the number of directors falls below two, the company is mandated to appoint another director within one month of the reduction in the statutory number of directors or refrain from carrying on business after the expiration of this period. International best practices dictate that the board should be of sufficient size relative to the scale and complexity of the company’s operations and composed in such a way as to ensure diversity of experience without compromising independence, compatibility, integrity and availability of members to attend meetings.

In addition, the SEC Code provides that there should be, at the minimum, an independent director on the board whose shareholding, directly or indirectly does not exceed 0.1 per cent of the company’s paid up capital and who should be free of any relationship with the company or its management that may impair, or appear to impair, the director’s ability to make independent judgements. The Bank Code provides that banks should have at least two independent directors, while discount houses should have at least one independent director.

Legal responsibility of the board

Generally, the primary responsibility of ensuring good corporate governance in the company rests with the board, as it sets the ‘tone at the top’ on governance issues. The board is mandated to ensure that the company carries on its business in accordance with its articles and memorandum of association, in conformity with the law and in observance of the highest ethical standards.

The board is also accountable and responsible for the performance and affairs of the company; it defines its strategic goals and ensures that its human and financial resources are effectively deployed to attain those goals. The principal objective of the board is to ensure that the company is properly managed to protect and enhance shareholder value, as well as to meet the company’s obligations to its other constituencies (i.e., employees, suppliers, customers and stakeholders). The board may exercise any of its functions through board committees consisting of such members of the board as it deems fit or, from time to time, appoint one or more of its number to the office of managing director and may delegate any of its powers to the appointed committee or managing director.6

Chairperson’s control of the board

The chairperson’s primary responsibility is to ensure the effective operation of the board such that it works towards achieving the company’s strategic objectives. The chairperson should not be involved in the day-to-day operations of the company. The day-to-day running of the company should be the primary responsibility of the chief executive officer (CEO) and the management team. For all public companies, the positions of chairperson of the board and CEO are mandatorily required to be separated and held by different individuals. The purpose of this is to avoid an over-concentration of powers in one individual that may rob the board of the required checks and balances in the discharge of its duties.

ii Directors

Although the law requires a mixture of both non-executive and executive directors, the numbers of non-executive directors (NEDs) are expected to be higher than the executive directors (EDs). There is, however, no division in the performance of their functions on the board. NEDs are expected to be key members of the board as they are required to bring independent judgement as well as scrutiny to the proposals and actions of the management and EDs, especially on issues of strategy, performance evaluation and key appointments. EDs are employees of the company who typically: (1) report for duty at the company’s offices; (2) earn salaries; and (3) usually have a contract of employment regulating their powers and functions. On the other hand, the NEDs are not employees of the company, as they do not earn salaries and do not have a contract of employment regulating their functions and powers. They are appointed pursuant to the provisions of the CAMA. The EDs give regular reports on the affairs of the company to the NEDs and act upon the mandate given by the board at board meetings.

Duties of directors

Directors are regarded as trustees of the company and thus stand in a fiduciary position in relation to the company. By virtue of their position, they are to exercise their powers and discharge their duties in good faith. They are required to act in the best interest of the company as a whole, including the interest of employees of the company; exercise their powers strictly for the purpose specified and not for a collateral advantage; prevent the fetter of their discretion; and avoid conflicts of interest.

Appointment, nomination and term of office of directors

When a company is newly incorporated, the first directors are typically appointed by the promoters of the company. Subsequently, shareholders appoint directors at the general meeting upon the nomination of the board. The CAMA regulates the term of office of directors by providing for the retirement and rotation of directors and this rule applies in the absence of any provision in the articles excluding its application. All directors are to retire at the first annual general meeting (AGM) of the company and subsequently one-third of the directors shall retire yearly. In determining the retiring directors, the rule is first in, first out, under which the directors who have been longest in office will be made to retire. However, a director may be appointed as a life director, in which case the rule of retirement and rotation will not apply.

The Bank Code provides that the CEO of banks and discount houses shall have a maximum tenure of 10 years and that the CEO shall not be eligible for reappointment in that bank or any of its subsidiaries.

Conflicts of interest of directors

Directors are under a duty to avoid conflict between their personal interests and their duties as directors. A director should not make secret profit or use corporate information to gain an advantage. This responsibility continues even after the director has resigned or been removed by the company. In instances where a director’s duty may conflict with his or her personal interest, this can be managed by: (1) disclosure to the board; or (2) abstaining from voting or taking decisions on such matters.7 In the event of uncertainty, the SEC Code provides that the concerned director should discuss the matter with the chairperson of the board, or the company secretary, for advice and guidance.

Proceedings of directors

Although the CAMA does not stipulate the number of times directors of a company may meet for the purpose of dispatching their business, the SEC Code provides that directors should meet a minimum of four times a year. Every director is required to attend at least two-thirds of all board meetings. Attendance is a prerequisite for the renomination of a director unless there are cogent reasons for non-attendance, and of which the board must notify the shareholders at the AGM. Board meetings are presided over by the chairperson and if he or she is not present within one hour of the time appointed for the meeting, the directors shall elect one of their number to be chairperson of that meeting.8


i Disclosure by the company

Financial reporting and disclosure obligations in Nigeria are principally governed by the CAMA, which is the primary legislation, and other subsidiary pieces of legislation, typically sectoral corporate governance codes. In addition, public companies and companies listed on the Nigerian Stock Exchange (NSE) have to comply with the SEC Code and The NSE Rulebook 2015 (the NSE Rules). Every company is required by the CAMA to prepare annual financial statements, and has a duty to present the same before the company in general meeting. This may be within 18 months of the incorporation of the company, and then yearly subsequently.9

By law, a copy of the company’s financial statements must be sent to every member of the company (whether or not entitled to receive notice of the general meeting); every debenture holder of the company (whether or not so entitled); and all other persons other than members and debenture holders, being persons so entitled, not less than 21 days before the date of the meeting at which they are to be presented. The financial statements must comply with the form provided by the CAMA and the FRCN Act. There are certain key sections that the financial statement must include and they are as follows:

  1. a statement of accounting policies;
  2. the balance sheet as at the last day of the year;
  3. a profit and loss account;10
  4. notes of the accounts;
  5. the auditors’ reports;
  6. the directors’ report;
  7. a statement of the source and application of funds;
  8. a value-added statement for the year;
  9. a five-year financial summary; and
  10. in the case of a holding company, the group financial statements.

As seen above, the directors’ report is among the matters to be contained in the financial statement and it provides: (1) a fair view of the development of the business of the company and its subsidiaries during the year; (2) the names of directors; and (3) the financial activities of the company and its subsidiaries, among other things. In the past few years, companies have started reporting on their corporate governance activities in the annual report.

Under the SEC Code, the obligation to disclose goes beyond financial disclosure and extends to social disclosure. The board is enjoined to report annually on the nature and extent of its corporate social responsibility, social, ethical, safety, anti-corruption policies, health and environmental policies and practices. This obligation includes disclosure of the company’s business principles and efforts towards implementation of same; the nature and extent of employment equity and gender policies and practices; information on number and diversity of staff, training initiatives, employee development and the associated financial investment; disclosure on the conditions and opportunities created for physically challenged persons or disadvantaged individuals; and disclosure on the company’s policies on corruption and related issues.

ii Disclosure by the directors and shareholders

Directors also have obligations to disclose their interests in a company including their interest in shares or debentures, interest in contracts and conflicts of interest. The SEC Code requires companies to disclose in their annual report details of shares held directly or indirectly by a director.

A shareholder who holds 10 per cent of the voting rights in a company has an obligation to disclose the same to the company within 14 days of his or her becoming aware. Such a shareholder also has a corresponding duty to the company when he or she ceases to be a substantial shareholder. However, this all turns on his or her knowledge. By virtue of Rule 397 of the Securities and Exchange Commission Rules and Regulations 2013, the registrar of a publicly listed company is under an obligation to provide the SEC with information on any transaction that brings the beneficial ownership of shares in a company to 5 per cent or more. The NSE Rules also require the prior approval of the NSE to effect a transfer of controlling block of shares (generally referred to as a block divestment) in a listed company.11 From the NSE Rules, a trade shall be treated as a block divestment where it involves: (1) a transfer of shares amounting to 30 per cent or more of the shares of a publicly listed company and the transferee shareholder intends to take control of the listed company; (2) the acquisition of additional shares by a shareholder of a publicly listed company that would result in an increase in the shareholder’s total holdings to 30 per cent or more of the company’s total listed shares and the shareholder intends to take control of the listed company; or (3) less than 30 per cent of a company’s total listed shares but will lead to a material change in the board or management ,or both, of a listed company.


There has been an interesting movement in the corporate responsibility sphere in Nigeria – driven mostly by regulation. A number of corporate governance codes have provisions that require companies to report on their corporate social responsibility (CSR) activities to employees, stakeholders and the wider society. Interestingly, some companies carry out their charitable activities under the umbrella of CSR, while other companies are strategically evolving and are crafting their CSR policy as a strategic aspect of business, leading to the development of their host communities and ultimately economic growth and development.

The SEC Code provides that a company’s annual report should contain a corporate governance report that includes the company’s sustainability policies and programmes covering issues such as corruption, community service, environmental protection, HIV/AIDS and general corporate social responsibility issues. The Bank Code also provides that banks shall demonstrate a good sense of CSR to their stakeholders.

i Whistle-blowing

The SEC Code provides that companies should have a whistle-blowing policy that should be known to employees, shareholders, contractors and the general public. The board has the responsibility of implementing this policy. The company’s whistle-blowing mechanism should ensure whistle-blower protection and should include a means of communication that could be used to anonymously report unethical practices. The company is also to have a designated senior-level officer assigned with the task of reviewing reported cases and providing the chairperson of the audit committee with a summary of reported cases, cases investigated, the process of investigation and the results of the investigations.12 Compared with the SEC Code, the Bank Code, which is applicable to banks and other financial institutions, covers a broader spectrum on the scope, procedure and protection of whistle-blowers. It tasks the head of internal audit with a supervisory role over the policy, and with the duty to: (1) review reported cases and recommend appropriate action to the managing director or CEO and, where issues affect executive management, refer the issues to the board; and (2) provide the chairperson of the board audit committee with a summary of cases reported and the results of the investigations. This development has had a profound effect as a good number of Nigerian companies have a whistle-blowing policy.


i Shareholder rights and powers

The rights of shareholders in a company include the right to receive annual reports and accounts; the right to attend and vote at general meetings; the right to share profits; the right to propose a resolution to be voted on at the AGM if the shareholder holds at least 10 per cent of the company’s voting share capital; and the right to require the directors of the company to call an extraordinary general meeting if the shareholders hold at least 10 per cent of the paid-up voting share capital.

The SEC Code further prescribes that the rights of shareholders of a company should be protected and specifically provides that the board should ensure that all shareholders are treated equally. In furtherance of this, no shareholder, however large his or her shareholding, should be given preferential treatment or superior access to information or other materials. The board is also charged with the responsibility of ensuring that minority shareholders are treated fairly at all times and equally protected from abusive actions of controlling shareholders. Despite the foregoing, shareholders with dominant or large shareholdings still have the propensity to influence the board by virtue of their shareholding regardless of whether the company is private or public.

There are a number of decisions statutorily reserved for shareholders, some of which include: the appointment and removal of subsequent auditors, the appointment and removal of directors, the appointment of liquidators in voluntary winding up, the declaration of dividend upon the recommendation of the board (however, in this case, the shareholders at a general meeting can decrease but cannot increase the dividend), the fixing of the remuneration of directors and the power to requisition an extraordinary general meeting. Shareholders also have the power to appoint, remove and reappoint directors in a general meeting. This power is exclusive to the shareholders in general meeting. This gives dominant shareholders some level of control over the company, as, with the cooperation of management, they are able to sponsor their directors. However, these directors would need to pass regulatory scrutiny in heavily regulated sectors like the banks and insurance companies, as well as the SEC if they are publicly listed companies.

Under the ISA, following a takeover bid, a dissenting shareholder may apply to the court to fix a fair value for his or her shares. Thereafter, he or she is bound by the order of the court. In reaching an assessment as to the fair value of the shares, the court has the discretion to appoint one or more independent valuers to assist the court in reaching a decision.

Under Nigerian law, there is no special treatment for long-term shareholders, such as extra votes or extra dividends. However, shareholders may by their shareholders’ agreement enter into a private contract to regulate their affairs on such issues as voting, dividends and the number of directors each shareholder may have on the board. However, except where a new shareholder enters into a deed of adherence, or similar agreement, such a special treatment would not be binding on the shareholder.

ii Shareholders’ duties and responsibilities

Although shareholders of a company generally look out for their interests and are concerned with getting the highest return on their investment in the company, the SEC Code emphasises that shareholders of public companies should play a key role in good corporate governance and states that institutional shareholders and other shareholders with large holdings should demand compliance with the principles and provisions of the SEC Code.

It appears that Nigerian institutional investors are typically not as aggressive as their global counterparts in their engagement with the management of companies and the regulators.13


The NCG space has in the past year (2017) seen a number of interesting developments. Notable among these are the following:

  1. the release of a National Code of Corporate Governance by the FRCN for the private, public and non-profit sectors (the FRCN Codes); and
  2. the proposed amendment of the CAMA.

First, the FRCN Corporate Governance Codes (the FRCN Codes), particularly the private sector code, were shadowed by strong criticism from stakeholders in the Nigerian business landscape, and this brought pressure on the federal government of Nigeria (FGN) to take immediate and unprecedented steps to assuage widespread concerns by suspending their implementation. The criticisms arose largely because the FRCN Codes by their provisions: (1) seek to supersede other corporate governance codes that regulate other sectors; (2) attempt to provide a one-size-fits-all code that fails to recognise the nuances of operating in various economic sectors; (3) are inconsistent with the provisions of the CAMA, which lays down minimum corporate governance standards; and (4) are mandatory in their application and, in sum, overreach the purview of the statutory mandate of the FRCN.

The suspension brought to a halt the changes that the FRCN Codes were set to make to the NCG sphere. However, the FGN reconstituted the board of the FRCN in January 2017, although it cannot be said yet what direction the new board will take in influencing the NCG sphere; a technical committee to review the suspended FRCN Codes has been constituted.

Lastly, the ongoing review of the CAMA undertaken by the CAC has led to the birth of a draft bill for the repeal of the CAMA 2004, and the enactment of the new CAMA would have a positive impact on the NCG space.

The CAMA, being the principal piece of substantive legislation that governs corporate entities in Nigeria, contains a number of basic corporate governance provisions that the draft bill seeks to amend. These include the following.

i Amendment of the composition of audit committees

The draft bill provides that the audit committee of a company shall comprise seven shareholders who are not directors of the company. This is a departure from the CAMA, which provides that a company’s audit committee should comprise an equal number of directors and shareholders, the total number not exceeding six. This amendment thus gives the duty of ensuring accountability and compliance with reporting standards by the company’s auditors to the shareholders, with the exclusion of any directors.

ii Introduction of a new section on corporate responsibility for financial reports

The draft bill provides that the managing director and internal auditor of a company shall certify that each auditors’ report contains only true statements of material fact and that the financial information included in the report fairly represents, in all material respects, the financial condition of the company. It mandates the managing director and internal auditor of a company to certify in the auditors’ report that: (1) the officer who signed the report has reviewed the report; (2) the report does not contain any untrue statement of material fact or omission of a material fact; and (3) the officer who signed the report is responsible for establishing and maintaining internal controls to ensure that material information relating to the company and its subsidiaries is made known to the officer by other officers of the companies, particularly during the period in which the report is being prepared, among other things.

However, these and other amendments that the draft bill seeks to make to the CAMA are presently of no effect, as the bill is still in its draft form and is yet to be passed by the National Assembly. The progress of this draft bill will be closely followed and monitored by stakeholders as NCG continues to make significant strides.

1 Olayimika Phillips is a partner, Michael Amadi is a senior associate and Theresa Emeifeogwu is an associate at Olaniwun Ajayi LP.

2 Cap. C20 Laws of the Federation of Nigeria 2004.

3 Notably, however, the CAMA is at present undergoing an amendment process and this chapter will also examine some of the key proposed amendments to the CAMA.

4 No. 6, 2011.

5 Cap. I17 Laws of the Federation of Nigeria 2004.

6 Hastons v. ACB Plc [2002] 12 NWLR (Pt. 782) 623.

7 Section 280 of the CAMA.

8 Ibid.

9 See Section 345(1) of the CAMA.

10 In the case of a company not trading for profit, an income and expenditure account for the year.

11 Rule 15.31 of the NSE Rulebook (as amended) 2015.

12 Article 32.4 of the SEC Code of Corporate Governance for Public Companies.

13 For a discussion on Nigerian institutional investors, see ‘An Awakening for the Institutional Investors in Nigeria: A Clarion Call to Action’, published in Thisday (16 June 2015). The article can be accessed online at www.pressreader.com/nigeria/thisday/20150616/282587376608641/TextView.