Jan 25, 2019

Nigerian Code of Corporate Governance 2018: necessity or superfluity? | Teingo Inko - Tariah


Plans to harmonize the corporate governance legal framework in Nigeria began in January, 2013 when a Steering Committee on National Code of Corporate Governance was commissioned to harmonize and unify all existing sectoral codes in Nigeria. Consequently, in 2016, the Financial Reporting Council of Nigeria (FRCN) published a draft 3-part National Code of Corporate Governance for the private, public and the non-profit sectors in line with sections 11(c), 50 & 51 of the Financial Reporting Council of Nigeria Act, 2011. The code for private sector was mandatory but did not specify any commencement or effective date. The non-profit sector code was stated to commence on October 17, 2016 on a “comply or justify non-compliance” basis while that of the public sector was to take effect upon the receipt of an executive directive from the Federal Government without a specified approach in terms of operation and application. Related blog posts on the 2015 code can be found here and here.

Following controversies that trailed the provisions of the 3-part 2015 code including conflict with existing law, the code was suspended by the Ministry of Industry, Trade & Investment, the supervising Ministry for the Financial Reporting Council of Nigeria pending a “detailed, review, extensive consultation with stakeholders and reconstruction of the Board of the Financial Reporting Council”. Consequently, the Nigerian Stock Exchange issued a circular on suspension of the frc code of corporate governance.

On Tuesday January 15, 2019, the Vice-President of Nigeria, Prof. Yemi Osinbajo and the Minister for Industry, Trade & Investment, Dr. Okechukwu Enelamah unveiled the Nigerian Code of Corporate Governance 2018. Below are some highlights of the content of the new code.

Overview of the 2018 Code


The purpose of the 2018 code is to institutionalize corporate governance best practices in Nigerian companies and to promote public awareness of essential corporate values and ethical practices that will enhance the integrity of the business environment. It is expected that by adhering to the principles articulated in the Code, companies will demonstrate a commitment to good governance practices thereby increase transparency, trust and integrity, and create an environment for sustainable business operations. Consequently, this will rebuild public trust and confidence in the Nigerian economy, thus facilitating increased trade and investment.

The Code is applicable to companies of varying sizes and complexities across industries/sectors. This will include public and private companies. The Code recognizes existing sectoral codes viz:

1.     Code of Corporate Governance for the Telecommunication Industry 2016, issued by the Nigerian Communications Commission (replaced 2014 NCC Code);

2.     Code of Corporate Governance for Banks and Discount Houses in Nigeria 2014 issued by the Central Bank of Nigeria (replaced 2006 CBN Code);

3.     Code of Corporate Governance for Public Companies in Nigeria 2011 issued by the Securities and Exchange Commission (replaced 2003 SEC Code);

4.     Code of Good Corporate Governance for Insurance Industry in Nigeria 2009 issued by the National Insurance Commission; and

5.     Code of Corporate Governance for Licensed Pension Fund Operators 2008 issued by the National Pension Commission.

However, the Code does not specify whether or not these codes would be subject to its provisions or would be applied side-by-side with them. Worthy of note also are the recently released codes of Corporate Governance by the Central Bank of Nigeria in 2018 for Bureau De Change operators, Primary Mortgage Banks, Finance Companies, Micro-Finance Banks, Development Finance Banks and Mortgage Re-finance companies. These codes have been tailored to suit the various types of financial institutions mentioned but there is no mention of these new set of codes released by the Central Bank of Nigeria.


The 2018 code adopts a principles based ‘Apply and Explain’ approach which requires companies to show how the specific activities undertaken by them best achieve the outcomes intended by the principles of the Code. Thus, companies are expected to adapt the principles to suit their type, size and growth phase.

Structure of the Code

The Code comprises of 6 parts: A – F, 28 principles and over 200 recommended practices. Each Part deals with a broad aspect of corporate governance which is broken into principles and recommended practices as follows:

Part A: Board of Directors and officers of the Board

Part B: Assurance – risk management, internal & external audit, whistle-blowing

Part C: Relationship with shareholders – General meetings, continuous dialogue, equitable treatment and shareholder protection.

Part D: Business conduct with Ethics – values, conflict of interest, etc.

Part E: Sustainability – attention to sustainability issues including environmental, social, occupational, community health and safety.

Part F: Transparency – disclosure.

Monitoring & Implementation

The FRCN is saddled with the responsibility of monitoring implementation of the Code. This will be done through sectoral regulators and registered exchanges who are empowered to impose appropriate sanctions based on specific deviation noted and the affected company. In addition, the FRCN may conduct reviews on implementation of the code where deviations recur and adopt other monitoring mechanisms as a result of such reviews. Where necessary, the FRCN in consonance with relevant regulatory agencies may issue corporate governance guidelines to aid implementation of the Code in line with sectoral peculiarities.


The 2018 Code of Corporate Governance appears to have deviated from the original goal of harmonizing and unifying all existing sectoral codes in Nigeria. Rather, the 2018 code adds to the number of existing codes of corporate governance in operation as listed above. However, since the 2018 code will operate more of a principles than rules based approach, unlike the 2015 code, companies may not face an additional burden of penalties and sanctions for deviation from the code.

Unlike the 2015 code, the 2018 code has adopted a different approach from the rules based model as there are no express sanctions for non-compliance. There seems to be some uncertainty as to the model of corporate governance to be adopted. Most of the sectoral codes are rules based with sanctions for non-compliance. It is believed that this will impact on implementation and assessment.

One wonders how the implementation of the 2018 code will fare especially as the FRCN hopes to work through other regulators and exchanges in this regard. The Securities & Exchange Commission has an existing code and currently, this forms the basis for assessment of the corporate governance parameter of the index created by the Nigerian Stock Exchange in conjunction with the Convention on Business Integrity (CBi). The telecoms, financial and insurance sectors, among others, also have codes of corporate governance.

Although the Executive Director of the FRCN reportedly stated that the codes of Corporate Governance by the Central Bank of Nigeria and Securities and Exchange Commission will serve as guidelines  when the 2018 code takes effect in January 2020, there is no clear expression in the code of how it will stand with the existing sectoral codes in terms of which will supercede where there is a conflict. Moreover, there are other sectoral codes not mentioned. Will the regulatory bodies or exchange implement this new code of corporate governance along with their respective codes? How feasible is it to implement and monitor compliance with two parallel codes?

Overall, the multiplicity of codes may end up becoming a burden for companies on one hand and for investors who wish to gauge their integrity and accountability on the other hand. It may be necessary to have some form of harmonized system to standardize corporate governance best practices in Nigeria. In the alternative, the new code could be made applicable to companies other than those with sector specific codes.

You can download a copy of the 2018 Nigerian Corporate Governance Code here nccg 2018

 Source: Legally Yours