Understanding the Nigerian Code of Corporate Governance: Enhancing Transparency, Accountability, and Ethical Practices – Series 2 

Introduction:

The Nigerian Code of Corporate Governance (the “Code”) was enacted in 2018 by the Financial Reporting Council of Nigeria (FRCN) in response to the suspension of the national code of corporate governance in 2016. The aim of the Code is to raise public awareness of fundamental corporate values and ethical behaviours, ultimately improving the business environment and restoring public confidence in the Nigerian economy. This article provides an overview of the Code, its principles, and its key provisions.

Promoting Transparency, Accountability, and Ethical Practices:

The Code serves as a framework for promoting transparency, accountability, and ethical practices within corporate entities. By adhering to the Code, businesses can foster an environment of trust and long-term growth. It emphasizes providing clear and accurate information to stakeholders and encourages ethical decision-making aligned with core values and principles. By upholding these standards, companies can enhance relationships with clients and stakeholders, building a foundation of trust.

Key Provisions of the Code:

1. Separation between the Chairperson and the Managing Director:

The Code recognizes the importance of separating the roles of the Chairperson and the Managing Director/Chief Executive Officer (MD/CEO) to avoid conflicts of interest and undue influence. It prohibits the MD/CEO or an Executive Director/Chief Operating Officer (ED) from assuming the role of Chairperson. In exceptional circumstances, if a former MD/CEO or Executive Director is appointed as Chairperson, a “cool-off” period of three years is required.

2. Independent Executive Director:

The Code mandates the appointment of an independent non-executive director (INED) for a term of up to nine years, with a maximum term of three years. The criteria for determining an INED’s independence include shareholding, representation of a shareholder with control or significant influence, employment by the company or group for at least five years prior to appointment, and serving at a directorate level with the company’s regulator within the preceding three years. The Board has the authority to assess an INED’s independence annually.

3. Board Meetings:

The Code emphasizes that board meetings are the primary means of carrying out the board’s work and achieving the company’s goals. The Board should meet at least once a quarter, and active participation is expected from every director. Attendance records serve as one of the criteria for re-election. Regular and well-structured meetings facilitate effective decision-making and ensure proper governance oversight.

4. Ethics and Transparency:

Ethics and transparency are fundamental to the Code. Businesses are expected to make decisions in line with ethical values and principles. The Code encourages providing accurate and clear information to stakeholders, fostering trust and accountability. By prioritizing ethical practices, companies can create a conducive environment for sustainable growth and positive stakeholder relationships.

Conclusion:

The Nigerian Code of Corporate Governance is a vital framework that shapes corporate practices in Nigeria. It promotes transparency, accountability, and ethical behaviour, contributing to the growth and stability of businesses within the country. At Highlaw Chambers, we possess a deep understanding of the Code and its practical implications. Our team of experienced legal professionals specializes in assisting companies in aligning with the Code’s provisions. We offer comprehensive services, including corporate governance audits, drafting governance policies and charters, advising on board composition and executive remuneration structures, developing risk management strategies, and ensuring compliance with disclosure and reporting requirements.

By adhering to the Nigerian Code of Corporate Governance, companies can build a solid foundation for sustainable success while maintaining the trust and confidence of stakeholders in the Nigerian economy.