i Legal and institutional framework

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

The general laws are:

  1. the Companies and Allied Matters Act (CAMA):2 the regulatory authority charged with the 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 (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 Nigerian corporate governance 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 the regulation and operation of the Nigerian securities market. It outlines, among other things, the operational rules for securities market operators, participants and stakeholders, and liquidity requirements.

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 for the 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 Nigerian corporate governance space has a number of corporate governance codes applicable to publicly listed companies and for sector-specific companies. Of particular import in this regard is the recently published Nigeria Code of Corporate Governance 2018 (NCCG Code). The NCCG Code was published by the FRCN on 15 January 2019, and seeks to promote public awareness of essential corporate values and ethical practices by recommending practices and principles that affected companies are to adhere to. The NCCG Code generally applies to all public companies as well as regulated private companies,6 and to private companies that are the holding companies of public companies.

It is interesting to note that the NCCG Code does not abolish the previously existing corporate governance codes; nor does it contain a superiority provision for circumstances where there is a conflict between the NCCG Code and the existing codes. It thus seems that companies would be required to comply with all applicable codes as necessary. 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 NCCG Code;
  2. the Securities and Exchange Commission Code of Corporate Governance for Public Companies 2011 (SEC Code); and
  3. the Code of Corporate Governance for Banks and Discount Houses, and the Guidelines for Whistle-Blowing 2014 (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 and 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 Nigerian corporate governance 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 being 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 when the functions of the board have been delegated to a committee of the board or to the managing director.

Under the provisions of the CAMA, every company is 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 a 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 the independence, compatibility, integrity and availability of members to attend meetings.

In addition, the NCCG Code provides that the board should have an appropriate mix of executive, non-executive and independent directors, with majority of the board being made up of non-executive directors, and it is desirable for most of the non-executive directors to be independent;7 and 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.8

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 managing director (MD) or chief executive officer (CEO) and the management team. Under the provisions of the NCCG Code, the positions of chairperson of the board and MD or 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 number of non-executive directors is expected to be higher than the number of executive directors, with the NCCG Code going further to state that it as desirable that a majority of the non-executive directors be independent non-executive directors. There is, however, no division in the performance of their functions on the board: non-executive directors 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 executive directors, especially on issues of strategy, performance evaluation and key appointments. Executive directors are employees of the company who typically report for duty at the company's offices, earn salaries and usually have a contract of employment regulating their powers and functions. On the other hand, non-executive directors 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 executive directors give regular reports on the affairs of the company to the non-executive directors 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:

  1. act in the best interests of the company as a whole, including the interests of employees of the company;
  2. exercise their powers strictly for the purpose specified and not for a collateral advantage;
  3. prevent the fetter of their discretion; and
  4. 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. SSubsequently, shareholders are vested with the power to appoint directors at general meetings of the company. 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. Similarly, the NCCG Code provides that the tenure of independent non-executive directors should not exceed three terms of three years for each.9

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 disclosing a possible conflict to the board, or by abstaining from voting or taking decisions on such matters.10 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, to get advice and guidance.11 On this matter, the NCCG Code as best practice also recommends the development of a conflicts of interest policy to prescribe the manner in which to deal with any potential conflicts of interest. Furthermore, all directors are required to declare any conflicts of interest annually, and any potential conflicts of interest should be disclosed to the board at the first possible opportunity.12

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. Similarly, the NCCG Code also requires that the board meets at least once every quarter, with every director encouraged to attend all board meetings.13 Attendance is a prerequisite for the renomination of a director unless there are cogent reasons for non-attendance, 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 five minutes of the time appointed for the meeting, the directors shall elect one of their number to be chairperson of that meeting.14


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 (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.15

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:

  1. a statement of accounting policies;
  2. the balance sheet as at the last day of the year;
  3. a profit and loss account;16
  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 must provide, among other things, a fair view of the development of the business of the company and its subsidiaries during the year; the names of directors; and the financial activities of the company and its subsidiaries. In the past few years, companies have started reporting on their corporate governance activities in the annual report. It should also be noted that the NCCG Code requires the submission of annual reports containing, among other things, a statement by the board on the level of application of the NCCG Code.17

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 (CSR), social, ethical, safety and anticorruption policies, and its health and environmental policies and practices. This obligation includes disclosure of:

  1. the company's business principles and its efforts towards the implementation of the same;
  2. the nature and extent of employment equity and gender policies and practices;
  3. information on the number and diversity of staff, training initiatives, employee development and the associated financial investment;
  4. the conditions and opportunities created for physically challenged persons or disadvantaged individuals; and
  5. the company's policies on corruption and related issues.

ii Disclosure by the directors and shareholders

Under the provisions of the NCCG Code, the conflicts of interest policy should be communicated, supported and monitored to provide reasonable assurance that all potential conflict of interest situations will be disclosed. All directors are thus required to promptly disclose any real or potential conflict of interest that they may have by virtue of their appointment.18

Directors also have obligations to disclose their interests in a company, including their interest in shares or debentures, and 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 of the fact. 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 a controlling block of shares (generally referred to as a block divestment) in a listed company.19 Under 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 where this 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 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 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 NCCG Code recommends that companies engage in sustainability policies and programmes covering social issues such as corruption, community service, environmental protection and serious diseases, and matters of general environmental, social and governance initiatives; and that the same should be included in the company's annual report.20

The SEC Code similarly 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 CSR issues. The Bank Code also provides that banks shall demonstrate a good sense of CSR to their stakeholders.

i Whistle-blowing

The NCCG Code recommends the development and review of adequate whistle-blowing policies and procedures, and that any issues reported through the whistle-blowing mechanism are summarised and presented to the board.21 The board is also required to ensure the existence of a whistle-blowing mechanism that is reliable and accessible, and that guarantees the anonymity of whistle-blowers; and that all disclosures resulting from whistle-blowing, as well as the identities of whistle-blowers, are treated in a confidential manner.22

Similarly, 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 can be used to anonymously report unethical practices. Companies should also to have a designated senior-level officer assigned with the task of reviewing reported cases, and with providing the chairperson of the audit committee with a summary of reported cases, cases investigated, the process of investigations and the results of the investigations.2324

Compared with the NCCG Code and the SEC Code, the Bank Code, which is applicable to banks and other financial institutions, covers a broader spectrum on the scope and procedure for whistle-blowing, and for the protection of whistle-blowers. It tasks the head of internal audit with a supervisory role over the policy, and with duties to review reported cases and recommend appropriate action to the MD or CEO and, where issues affect executive management, refer the issues to the board; and 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 considerable number of Nigerian companies now have a whistle-blowing policy in place.


i Shareholder rights and powers

The rights of shareholders in a company include:

  1. the right to receive annual reports and accounts;
  2. the right to attend and vote at general meetings;
  3. the right to share profits;
  4. the right to propose a resolution to be voted on at the AGM if the shareholders hold at least 10 per cent of the company's voting share capital; and
  5. 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 NCCG Code and the SEC Code further prescribe 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.25

A number of decisions are statutorily reserved for shareholders, including:

  1. the appointment and removal of subsequent auditors;
  2. the appointment and removal of directors;
  3. the appointment of liquidators in a voluntary winding up;
  4. the declaration of a dividend upon the recommendation of the board (however, in this case, the shareholders at a general meeting can decrease but not increase the dividend);
  5. the fixing of the remuneration of directors; and
  6. 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 if their companies operate in heavily regulated sectors (e.g., banks and insurance companies in the finance sector), 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, under 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 a similar agreement, such special treatment would not be binding on the new 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.26 In a perceived bid to bridge this gap, the NCCG Code recommends that a policy be developed by the board to ensure appropriate engagement with shareholders. The chairperson is also encouraged to interact with shareholders in order to develop a balanced understanding of shareholder issues and ensure that their views are communicated to the board.27 It is hoped that this would have the desired effect of improving shareholder engagement.


Two major events impacted the Nigerian corporate governance space in 2018 and early 2019: the release of the NCCG Code and the passage of the Companies and Allied Matters (Repeal and Re-enactment) Bill 2018 (CAMA Bill) through the National Assembly.

The NCCG Code adopts a principles-based approach in setting the minimum standards of practice that organisations should adopt in order to comply. It consists of 28 principles that cover matters such as boards of directors, business conduct and ethics, sustainability and transparency, and relationships with shareholders. Companies are to adopt an apply and explain approach in the adoption of the NCCG Code to prevent blind compliance: companies are to comply with the NCCG Code as much as possible, and explain why certain of its recommendations could not be complied with.

The implementation of the NCCG Code by the FRCN empowers sectoral regulators and registered exchanges to impose appropriate sanctions for failure to comply with the NCCG Code. Furthermore, the NCCG Code provides that guidelines for implementation will be issued subsequently by the FRCN in consonance with the sectoral regulators. While not derogating from the powers of the FRCN to directly monitor the implementation of the NCCG Code, the NCCG Code also envisages monitoring by sectoral regulators.

The existence of several codes of corporate governance has been identified as a possible cause of friction among agencies with respect to applicability and enforcement; however, stakeholders are enthusiastic, and are hopeful for a better expression of corporate governance in Nigeria.

Relatedly, the passage of the CAMA Bill through the National Assembly (although awaiting presidential assent) is seen as a further step in the right direction in the Nigerian corporate governance space. There are several provisions that would seek to impact the country's corporate governance regime, such as the fact that the obligation to disclose substantial shareholding in a public company has been amended to relate to the holders of 5 per cent of the shares, as opposed to the earlier provision of a 10 per cent shareholding.28 Furthermore, public companies are also required to publish their audited accounts on their websites to ensure the public is kept informed, a requirement that should significantly improve shareholder engagement in the affairs of public companies.

There is little doubt that 2019 promises to see significant improvements in the Nigerian corporate governance space.


1 Olayimika Phillips is a partner, Michael Amadi is a senior associate and Similoluwa Somuyiwa and Oludare Onakoya are associates 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; this chapter also examines some of the key proposed amendments to the CAMA.

4 No. 6, 2011.

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

6 Private companies that file returns to any regulatory authority other than the Federal Inland Revenue Service and the CAC.

7 Principle 2.3(b) of the NCCG Code.

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

9 Principle 12.10 of the NCCG Code.

10 Section 280 of the CAMA.

11 This is also provided in Principle 25.2.3 of the NCCG Code.

12 Principle 25.2.7 of the NCCG Code.

13 Principle 10 of the NCCG Code.

14 Section 263(4) of the CAMA.

15 See Section 345(1) of the CAMA.

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

17 Principle 28.5 of the NCCG Code.

18 Principle 25.2.1 of the NCCG Code.

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

20 Principle 28.2l of the NCCG Code.

21 Principle of the NCCG Code.

22 Principle 19.2 of the NCCG Code.

23 Principle 19.4 of the NCCG Code.

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

25 Principle 23.1 of the NCCG Code.

26 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.

27 Principle 22 of the NCCG Code.

28 Section 121 of the CAMA Bill.