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Stakeholders in the financial sector have expressed their support for the new corporate governance rules recently issued by the Central Bank of Nigeria (CBN), considering them appropriate responses to recent developments in the banking sector.
The CBN’s new guidelines, titled ‘Corporate Governance Guidelines,’ were issued in a circular to all commercial, merchant, non-interest and payment service banks, as well as financial holding companies. The guidelines include extending the tenure of bank managing directors to 12 years, restricting the number of extended family members on a bank’s board to two, and requiring CBN approval for acquiring up to five per cent stake in a financial holding company.
Experts have praised the CBN for addressing industry challenges and developments through these guidelines. Professor Olawale Ajai of the Lagos Business School emphasized that the guidelines, although appearing adhoc, were timely responses. He stated that the objective of banking consolidation was to eliminate closely held family bank businesses while minimizing corporate governance risks, which is well-supported by the new guidelines.
However, Professor Ajai advised the regulator not to stifle shareholders’ democracy and legitimate market capitalism, urging for flexibility and adherence to the rule of law. He emphasized the need to avoid pursuing adhominem policies against specific individuals.
Rotimi Fakayejo, CEO of Enterprise Stockbrokers, welcomed the extension of the tenure of bank managing directors and restrictions on ownership of controlling stakes in financial holding companies. He believes the changes will bring needed adjustments to the banking sector and enhance corporate governance.
Regarding the requirement for CBN approval, Fakayejo pointed out that it could lead to better corporate governance if there were no questionable funds involved. He expressed support for the CBN’s efforts to mitigate disputes over ownership and directorship of firms.
On the other hand, Professor Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria, questioned the need for extending the tenure of bank MDs, suggesting that achievements in 12 years could also be accomplished in 10 years.
Overall, experts acknowledged the significance of the new CBN rules in fostering growth and stability within the banking sector while emphasizing the importance of responsible governance and transparency.
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