Corporate governance encompasses the systems, processes, and structures that direct and control companies. In Nigeria’s evolving business landscape, strong governance practices are essential for building stakeholder confidence, accessing capital markets, and ensuring sustainable growth.
The Nigerian Corporate Governance Framework
Nigerian companies operate under multiple governance regulations:
- Companies and Allied Matters Act (CAMA) 2020
- Securities and Exchange Commission (SEC) Code of Corporate Governance
- Central Bank of Nigeria (CBN) guidelines for financial institutions
- Nigerian Stock Exchange (NSE) listing requirements
- Financial Reporting Council of Nigeria (FRCN) standards
Board Structure and Composition
Board Independence
Effective boards require the right balance of independence and expertise:
- At least one-third of directors should be independent
- Independent directors bring objectivity and external perspectives
- Clear criteria for director independence must be established
- Regular assessment of director independence is essential
Diversity and Skills
Boards should reflect diverse backgrounds and complementary skills:
- Industry expertise and business experience
- Financial literacy and audit experience
- Risk management knowledge
- Technology and digital transformation understanding
- Gender, age, and cultural diversity
Board Size and Structure
Optimal board size typically ranges from 7-15 members, depending on company size and complexity. Key considerations include:
- Ensuring adequate representation without being unwieldy
- Balancing executive and non-executive directors
- Separating Chairman and CEO roles where possible
- Establishing clear role definitions and expectations
Board Committees
Audit Committee
Essential for financial oversight and control:
- Review financial statements and accounting policies
- Oversee internal and external audit functions
- Monitor internal control systems
- Ensure compliance with financial regulations
Risk Management Committee
Critical for identifying and managing business risks:
- Develop risk management frameworks
- Monitor key risk indicators
- Oversee business continuity planning
- Review cyber security and data protection measures
Nomination and Remuneration Committee
Ensures proper succession planning and compensation:
- Board succession planning and recruitment
- Executive compensation design and benchmarking
- Performance evaluation frameworks
- Talent development and retention strategies
Transparency and Disclosure
Financial Reporting
Timely and accurate financial disclosure builds stakeholder confidence:
- Quarterly and annual financial statements
- Management discussion and analysis
- Key performance indicators and metrics
- Forward-looking information and guidance
Material Information Disclosure
Stakeholders need access to material information affecting company value:
- Strategic initiatives and major transactions
- Changes in management or board composition
- Significant legal or regulatory developments
- Risk factors and mitigation strategies
Stakeholder Communication
Regular engagement with key stakeholders:
- Annual general meetings and investor presentations
- Quarterly earnings calls and updates
- Website maintenance with current information
- Social media and public relations management
Internal Controls and Risk Management
Internal Control Systems
Robust internal controls protect company assets and ensure accurate reporting:
- Segregation of duties and authorization levels
- Regular internal audits and control testing
- IT controls and cyber security measures
- Fraud prevention and detection mechanisms
Risk Assessment and Monitoring
Systematic approach to risk management:
- Risk identification and assessment methodologies
- Risk appetite and tolerance frameworks
- Key risk indicator monitoring
- Regular risk reporting to board and management
Ethical Standards and Compliance
Code of Conduct
Clear ethical standards guide employee and management behavior:
- Conflicts of interest policies
- Anti-corruption and bribery guidelines
- Whistleblower protection mechanisms
- Regular training and awareness programs
Regulatory Compliance
Systematic approach to regulatory compliance:
- Compliance monitoring and reporting systems
- Regular regulatory updates and training
- Relationship management with regulators
- Documentation and record-keeping procedures
Performance Evaluation and Improvement
Board Evaluation
Regular assessment of board effectiveness:
- Annual board and committee evaluations
- Individual director performance assessments
- Third-party evaluation every few years
- Action plans for improvement areas
Management Performance
Clear performance metrics and accountability:
- Key performance indicators and targets
- Regular performance reviews and feedback
- Succession planning for key positions
- Executive development and training programs
Implementing Good Governance
Getting Started
Steps for improving corporate governance:
- Governance Assessment: Evaluate current practices against best standards
- Board Enhancement: Recruit qualified independent directors
- Policy Development: Create comprehensive governance policies
- System Implementation: Establish monitoring and reporting systems
- Training and Awareness: Educate board and management on governance requirements
Common Implementation Challenges
- Resistance to change from existing management
- Lack of qualified independent directors
- Cost and resource constraints
- Balancing governance with operational efficiency
- Keeping pace with evolving regulations
Benefits of Strong Governance
- Improved Access to Capital: Better governance reduces investor risk perceptions
- Enhanced Reputation: Strong governance builds stakeholder confidence
- Better Decision Making: Structured processes improve decision quality
- Risk Mitigation: Systematic risk management protects company value
- Regulatory Compliance: Proactive governance prevents regulatory issues
Conclusion
Corporate governance is not just about compliance – it’s about creating sustainable value for all stakeholders. Companies that invest in strong governance practices position themselves for long-term success in an increasingly competitive and regulated environment.
At Matthew Salako & Co, we help companies design and implement governance frameworks that meet regulatory requirements while supporting business objectives. Our corporate services team provides practical guidance for boards and management teams seeking to enhance their governance practices.