Responsibilities of the board (supervisory)

Board structure

Is the predominant board structure for listed companies best categorised as one-tier or two-tier?

The board structure for listed companies can best be described as one-tier, comprising both executive and non-executive directors.

Board’s legal responsibilities

What are the board’s primary legal responsibilities?

The board’s legal responsibilities include directing and managing the affairs of the company, securing its assets, performing its duties in the interest of the company and furthering the purposes for which the company was formed.

Board obligees

Whom does the board represent and to whom do directors owe legal duties?

The board represents the company and owes its duties primarily to the company. The board is to perform its duties in the interest of the company and all its shareholders as a whole, and not in the interest of a specific shareholder or a section of the shareholders. The board is also to take into consideration the interests of the employees in general in performing its duties. However, the interests of the company must always come first, regardless of whether the actions of the board may adversely affect a shareholder.

Enforcement action against directors

Can an enforcement action against directors be brought by, or on behalf of, those to whom duties are owed? Is there a business judgment rule?

The directors owe their duty to the company. The company can bring an action against a director to enforce any duty imposed by law or contract. A shareholder may bring an action to prevent or redress a breach of duty by the directors.

A shareholder may also, with the leave of court, bring a derivative action on behalf of the company where the wrongdoers are directors who are in control and, thus, will not redress the wrong done to the company. A shareholder may also apply for relief from the court on the grounds that the affairs of the company are being conducted in an unfairly prejudicial and oppressive manner.

Care and prudence

Do the duties of directors include a care or prudence element?

The directors of a company owe a duty of care and skill to the company and are to exercise the degree of care and skill that a reasonably prudent director would exercise in comparable circumstances. A director is required to exercise the powers and duties of his or her office honestly, in good faith and in the best interests of the company.

Board member duties

To what extent do the duties of individual members of the board differ?

The same standard of care in relation to the duties of a director is expected of all members of the board, including executive and non-executive directors. The relationship is a fiduciary one, and directors are trustees of the company’s assets and are bound to exercise their powers in the interest of the company.

However, there may be additional contractual liabilities and benefits for executive directors under the principles of ‘master and servant’ where there is a contract to that effect.

Delegation of board responsibilities

To what extent can the board delegate responsibilities to management, a board committee or board members, or other persons?

The board is empowered, subject to any specific provisions in the articles to the contrary, to delegate any or all of its powers to a managing director or to committees made up of members of the board. The managing director or committee shall, in exercising the responsibilities delegated to them, conform to any directions or regulations of the board. However, this delegation should not be done in such a way that it amounts to an abdication of duty. Even after delegating its powers, the overall responsibility of directing and managing the affairs of the company still ultimately lies with the board.

Non-executive and independent directors

Is there a minimum number of ‘non-executive’ or ‘independent’ directors required by law, regulation or listing requirement? If so, what is the definition of ‘non-executive’ and ‘independent’ directors and how do their responsibilities differ from executive directors?

Non-executive directors are those whose roles are strictly supervisory and who do not participate in the day-to-day running of affairs of the company but are, nevertheless, important members of any board in that they play a key role in the transparency, integrity and credibility of the board. An independent director, on the other hand, serves the function of bringing an objective, unbiased perspective to the board in carrying out its functions.

The Companies and Allied Matters Act 2020 (CAMA) and the various codes that govern specific industries set out different requirements for the numbers and types of directors of companies operating in those sectors, and different definitions of ‘independent director’.



CAMA makes it mandatory for public companies to have at least three independent directors. It describes an ‘independent director’ as a director (or whose relatives either separately or together with the director or each other) during the two years preceding their proposed appointment:

  • was not an employee of the company;
  • did not:
    • make payments to, or receive payments from, the company of more than 20 million naira;
    • directly or indirectly own more than 30 per cent of shares or other ownership interest in any entity that the company made payments to, or received payments from, of more than 20 million naira; or
    • act as a partner, director or an officer of a partnership or a company that made payments to, or received payments from, of more than 20 million naira;
  • did not own directly or indirectly more than 30 per cent of the shares of any type or class in the company; and
  • was not engaged, directly or indirectly, as an auditor for the company.


The SEC Code

The Securities and Exchange Commission Code of Corporate Governance in Nigeria (the SEC Code) recommends that there be at least five members of a board, with a mix of both executive and non-executive directors, that the latter should outnumber the former, and there should be a minimum of one independent director.

The SEC Code describes an independent director as a non-executive director who:

  • is not a substantial shareholder of the company (ie, their shareholding, directly or indirectly, does not exceed 0.1 per cent of the company’s paid-up capital);
  • is not a representative of a shareholder that has the ability to control or significantly influence management;
  • has not been employed by the company or the group of which it currently forms part, or has not served in any executive capacity in the company or the group, for the preceding three financial years;
  • is not a member of the immediate family of an individual who is, or has been in any of the past three financial years, employed by the company or the group in an executive capacity;
  • is not a professional adviser to the company or group, other than in the capacity of a director;
  • is not a significant supplier to or customer of the company or group;
  • has no significant contractual relationship with the company or group and is free from any business or other relationship that could materially interfere with his or her capacity to act in an independent manner; and
  • is not a partner or an executive of the company’s audit firm, internal audit firm, legal or another consulting firm that has a material association with the company and has not been a partner or an executive of any such firm for the three financial years preceding his or her appointment.


The CBN Code

The Central Bank of Nigeria Code of Corporate Governance for Banks and Discount Houses in Nigeria (the CBN Code) provides that the number of non-executive directors on a bank’s board should exceed the number of executive directors, and at least two of the non-executive directors should be independent directors; and that for discount houses at least one non-executive director should be an independent director.



The Code of Corporate Governance for Licensed Pension Operators (the PENCOM Code) provides that the number of non-executive members (excluding the chair) of a board must equal the number of executive directors, and at least one non-executive member should be an independent director. It defines an ‘independent director’ as one who has no relationship with the company, its related companies or officers that could interfere or be reasonably perceived to interfere with the exercise of his or her independent business judgement.



The National Insurance Commission Code of Corporate Governance for the Insurance Industry in Nigeria (the NAICOM Code) provides that the board of insurance companies should have a minimum of seven and a maximum of 15 members, that the maximum number of executive directors should not exceed 40 per cent of the board, and there should be at least one independent director.


The NCC and NCCG Codes

The Nigerian Communications Commission Code of Corporate Governance for telecommunication companies (the NCC Code) and the Nigerian Code of Corporate Governance (the NCCG) also provide that the number of non-executive directors should exceed the number of executive directors; however, the NCC Code also requires at least one non-executive director to be an independent director.

Board size and composition

How is the size of the board determined? Are there minimum and maximum numbers of seats on the board? Who is authorised to make appointments to fill vacancies on the board or newly created directorships? Are there criteria that individual directors or the board as a whole must fulfil? Are there any disclosure requirements relating to board composition?

Qualifying for a directorship

Generally, persons of unsound mind, under the age of 18, previously convicted of fraud or breach of duty in connection with the promotion, formation or management of a company, and insolvent persons are statutorily disqualified from being directors.

There is no restriction on the nationality of directors. Non-Nigerian citizens are permitted to be directors. Aside from the NCCG and the NCC Codes, there are no gender requirements for the composition of boards.

A person over 70 years of age, who is or is to be appointed as a director in a public company, is required to disclose his or her age to the members of the company in a general meeting. Failure to do so amounts to an offence under the CAMA. Special notice of the resolution approving or appointing such a director must be given by the company to its members, disclosing the age of the director.

An appointee to the board of a public company is also expected to disclose his or her membership of boards of other companies to enable the shareholders to give full consideration to his or her other obligations and commitments in determining his or her suitability to be a board member.

However, additional criteria are contained in the various Codes that govern specific industries, as can a specific company’s by-laws and articles. For example, a company may, by its articles, require that directors hold a specified number of shares. A director who fails to obtain their share qualification within two months of appointment must vacate his or her office until he or she obtains the shareholding qualification.

The PENCOM Code provides that a director of a pension fund administrator must not be a director, an employee, a principal officer or a shareholder in a pension fund custodian with which the pension fund administrator conducts business.

The regulations and guidelines governing certain industries may require managing directors and key management operating in these areas to have specific qualifications.

The SEC Code permits public companies to form governance or remuneration committees, the function of which is to establish the criteria for board and board committee membership and to periodically evaluate the skills, knowledge and experience required to sit on the board.

The CBN Code prescribes that members of the board shall be qualified persons of proven integrity and be knowledgeable in business and financial matters, in accordance with the extant CBN Assessment Criteria for Approved Persons’ Regime for Financial Institutions. This is the same position in the CBN Codes for microfinance Banks (MFBs), development finance institutions (DFIs) and finance companies (FCs).

The NAICOM Code also emphasises competence and integrity.


Composition of boards of directors

CAMA requires every company that is not a small company (which can only have one director) to have a minimum of two directors at all times but does not state a maximum number of directors. However, it does provide that the number of directors shall be determined in writing by the subscribers of the company’s memorandum of association, or a majority of them with the power of the shareholders at a general meeting to increase or reduce the board.

The laws and regulations governing particular industries also set a minimum and a maximum number of board seats:

  • The CBN Code prescribes a minimum and maximum board size of five and 20 directors respectively.
  • The SEC Code prescribes a minimum of five directors and directs that the board of a company be of sufficient size relative to the scale and complexity of the operations of the company.
  • The NAICOM Code prescribes a minimum of seven and a maximum of 15 board members for insurance companies.
  • The PENCOM Code prescribes that the board of a company shall not exceed a size that will allow it to employ simple and effective methods of work to enable each director to feel a personal responsibility and commitment to the company, and the board must take into account the scope and nature of the company’s operations.
  • The NCC Code requires:
    • that the composition of a board includes a mix of skills, diversity, experience and genders;
    • that the number of directors should reflect the scale, size, complexity and reach of the business of the company;
    • that the skills and resource requirements of the company have to be taken into consideration;
    • a majority of the board to be non-executive directors;
    • at least one independent director must hold, directly or indirectly, no more than 0.1 per cent of a shareholding in the company;
    • one-third of the non-executive directors retire each year by rotation, subject to reappointment; and
    • non-executive directors should not remain on the board of larger companies for a continuous period in excess of 15 years.
  • The NCCG does not provide for a minimum or a maximum number of directors, but recommends that a board be of sufficient size to effectively undertake and fulfil its business (ie, overseeing, monitoring, directing and controlling the company’s activities) and be relative to the scale and complexity of the company’s operations. However, it does require a board to have at least one independent director, who may hold, directly or indirectly, no more than 0.1 per cent of a shareholding in the company.


The CBN Code for MFBs requires the following of MFBs’ boards.

  • Unit MFB boards:
    • must have a minimum of five and a maximum of seven members;
    • including at least one independent non-executive director (INED); and
    • the managing director or chief executive must be the only executive director.
  • State MFB boards:
    • must have a minimum of five and a maximum of nine members, including:
      • at least one INED, if there are five or six members; or
      • at least two INEDs, if there are seven members.
  • National MFB boards:
    • must have a minimum of seven and a maximum of 12 members;
    • including at least two INEDs.


The CBN Code for DFIs requires that a board of a DFI:

  • has a minimum of seven and a maximum of 11 members; or
  • be in accordance with the law establishing the institution; and
  • that the board of any FC be limited to a minimum of five and a maximum of nine members.


The CBN Codes for MFBs, DFIs and FCs also provide that:

  • no more than two members of a family can be on the board at the same time (‘family’ includes a director’s spouse, parents, children, siblings, cousins, uncles, aunts, nephews, nieces and in-laws); and
  • a board must be constituted in such a way that the number of non-executive directors exceeds the number of executive directors.


Filling vacancies

Vacancies on a board may be filled by the shareholders of a company during a general meeting.

A board of directors is also empowered to appoint new directors to fill casual vacancies created by death, resignation, retirement or removal of a director. These appointments are, however, subject to ratification by the shareholders at the next general meeting.

Board leadership

Is there any law, regulation, listing requirement or practice that requires the separation of the functions of board chair and CEO? If flexibility on board leadership is allowed, what is generally recognised as best practice and what is the common practice?

While the role of the chief executive is to see to the day-to-day running and management of the company, the chair’s role is to provide overall leadership, direction and supervision of the board. The separation of the roles of board chair and CEO is considered best practice.

CAMA provides that the chair of a public company must not act as the chief executive of such a company. A similar restriction exists in NCCG.

The SEC Code recommends that the board of a company should not be dominated by any one person, and the positions of chair and CEO should be separate and held by different individuals. In addition, the chair should be a non-executive director to ensure the effective operation of the board.

The CBN Code (including the Codes for MFBs, DFIs and FCs) and the NAICOM Code state that no single person shall hold or combine the office of chair of the board and CEO or managing director. The CBN Code further provides that no executive vice-chair shall be recognised in the board structure.

The PENCOM Code, the NCCG and the NCC Code also require the position of chair of the board and CEO to be occupied by separate individuals.

Board committees

What board committees are mandatory? What board committees are allowed? Are there mandatory requirements for committee composition?

Audit committees

Every public company is required to set up an audit committee of five members comprising three members and two non-executive directors. Members of an audit committee are not entitled to remuneration and are subject to re-election annually. The functions of an audit committee include:

  • ascertaining whether the accounting and reporting policies of the company are in accordance with legal requirements and agreed ethical practices;
  • reviewing the scope and planning of audit requirements;
  • reviewing the findings on management matters in conjunction with the external auditor and departmental responses thereon;
  • keeping under review the effectiveness of the company’s system of accounting and control;
  • making recommendations to the board regarding the appointment, removal and remuneration of the external auditors of the company; and
  • authorising the internal auditor to carry out investigations into any activities of the company that may be of interest or concern to the committee.


The various corporate governance codes require that members of the audit committee should be able to read and understand basic financial statements and be in a position to make valuable contributions to the committee, and the SEC and CBN Codes provide that at least one member of this committee should be financially literate. The SEC Code further provides that, when necessary, external professional advice may be sought by the committee.


Risk management and governance or remuneration committees

In addition to an audit committee, the SEC Code permits the board of a public company to establish a risk management committee and a governance or remuneration committee.

The risk management committee assists in overseeing the risk profile and the risk management framework to be determined by the board.

The governance or remuneration committee periodically evaluates the skills and experience required of the individual members of the board and the board as a whole and makes recommendations on the compensation structure for the executive directors of the company.


Committees under the CBN Codes

The CBN Code also directs banks and discount houses in Nigeria to establish committees responsible for overseeing risk management and auditing (it provides that these functions may be carried out by one committee, particularly in small institutions), and a board governance and nominations committee.

The Code proscribes the chair of a board from being a member or chair of any committee, and provides that board committees must be headed by non-executive directors; a board remuneration committee must have at least two non-executive directors; and a board audit committee must have at least three members, consist only of non-executive directors, and be headed by an independent director.

The CBN Codes for MFBs, DFIs and FCs maintain the same positions as the main CBN Code, but make no provisions for the composition of remuneration committees and provide for an additional committee: the board credit committee. The Codes for MFBs and FCs merely state that this committee must be comprised of members knowledgeable in credit analysis.

The Codes for MFBs and FCs require all board committees to have their charters approved and reviewed every three years, or from time to time as determined by the Central Bank of Nigeria (CBN). The CBN Code and the CBN Code for DFIs merely state that each board committee must have a charter that is approved by the CBN.

Finally, the Codes for MFBs and FCs provide that a board may not replace members of the board audit committee and a company’s external auditors at the same time.


Committees under the PENCOM Code

The PENCOM Code requires pension fund administrators and pension fund custodians to constitute nominating committees, the duty of which is to make recommendations to the board on all board appointments. This committee must consist of three directors, including the chair of the board and an independent director.


Committees under the NCCG

The NCCG recommends establishing the same committees provided by the CBN Code, and also provides that when appointing members of the board committees, there should be a balanced distribution of power so that no individual has the ability to dominate decision-making and undue reliance is not placed on any individual; that each committee should comprise at least three members; and individual committee charters should indicate if they require INEDs.

It is common practice among quoted companies to have various board committees assist the board in administering the affairs of these companies and strengthening corporate governance. These committees, which may be known by different names in different companies, include nomination committees, general-purpose committees, remuneration or compensation committees, risk assessment committees, strategy committees, and corporate governance and finance committees.

Board meetings

Is a minimum or set number of board meetings per year required by law, regulation or listing requirement?

There are no statutory minimum requirements on the number of board meetings per year. However, directors are required to meet no later than six months after the incorporation of the company. The directors may otherwise regulate their meetings.

The PENCOM, CBN, SEC and NCC Codes, the NCCG, and the CBN Codes for MFBs, DFIs and FCs recommend that board meetings be held at least quarterly in each financial year. The NAICOM Code provides that the board should meet not less than four times a year.

Board practices

Is disclosure of board practices required by law, regulation or listing requirement?


CAMA provides that, where a director presents him or herself for re-election, a record of his or her attendance at meetings of the board during the preceding year must be made available to members at the general meeting where he or she is to be re-elected. Where a person to be appointed or re-elected as a director is 70 years old or older, a notice of his or her election or re-election must disclose their age to the shareholders.


The CBN Codes

The CBN Code and the CBN Codes for MFBs, DFIs and FCs require the board to disclose the total number of board meetings held in the financial year and attendance by each director in its annual report.

The CBN Code also provides that members of the board be appraised by an independent consultant annually on all aspects of the board’s structure, composition, responsibilities, processes and relationships, and the report of the independent consultant must be presented to the shareholders in the general meeting and to the CBN.

The CBN Codes for MFBs and FCs further provide that a copy of the annual board appraisal conducted by the independent consultant must be forwarded to the CBN no later than 31 March of the following year.


The SEC Code

The SEC Code provides that the board of a public company must include a corporate governance report in its annual reports, to be circulated to members and the regulatory authorities.

The report may contain information on the composition and responsibilities of board committees and records of attendance at board and shareholders’ meetings by directors during the period covered by the annual report; however, the SEC Code provides that the company’s annual report ought to make sufficient disclosures on its accounting and risk management issues, indicating the board’s responsibility for the process of risk management and its opinion on the effectiveness of the process.

Public companies must also disclose the details of any director’s interests in contracts with the company, its subsidiaries or holding companies, and should also disclose any service contracts and any other significant contracts with controlling shareholders.

A company’s directors are required to disclose:

  • their shareholdings in the company;
  • loans made by the company to the director;
  • the director’s interests in any contract involving the company; and
  • any conflicts of interest in relation to the company. 


The SEC Code also requires directors to disclose any directorships in other companies, so that the members of the company can take a director’s other responsibilities into consideration when assessing his or her suitability as a director.

The NCCG has similar provisions to the SEC Code.

Board and director evaluations

Is there any law, regulation, listing requirement or practice that requires evaluation of the board, its committees or individual directors? How regularly are such evaluations conducted and by whom? What do companies disclose in relation to such evaluations?

The NCC Code

Under the NCC Code, the board is required to establish a system for periodic evaluation of its own performance and that of its committees, chair, chairs of its committees, and individual directors. This should be done at least annually.

A statement of evaluation must be included in a company’s annual returns, stating whether an evaluation had been conducted during the period under review. The evaluation must be an objective and independent process.

The appraisal of the chief executive is done by the board, or a committee of the board made up of non-executive directors.


The SEC Code

The SEC Code requires the board to establish a system to annually undertake a rigorous evaluation of its own performance and that of its committees, chair and individual directors. The board may engage the services of external consultants to facilitate the evaluation.

The chair oversees the evaluation of the CEO’s performance, while the CEO oversees the executive directors’ evaluations. The results of the evaluations must be communicated to and discussed by the board as a whole, while the chair must communicate and discuss the evaluation of the independent directors with them. The results are used as a guide for re-election.

The SEC Code recommends providing training for any director whose performance is found to be unsatisfactory or their removal from office if this is not feasible.



The PENCOM Code has similar provisions to the SEC and NCC Codes, but also requires that copies of the evaluations are submitted to the Pension Commission and are included in the company’s annual corporate governance report.

Under the PENCOM Code, the evaluation should answer questions such as:

  • how well the board performed against any performance objectives that have been set;
  • what the board’s contribution to the testing and development of the strategy has been;
  • whether the composition of the board and its committees is appropriate with the right mix of knowledge and skills to maximise performance in the light of future strategy;
  • if the board responded to any problems or crises that have emerged and whether these could have been foreseen;
  • how well the board communicates with the management team, company employees and others;
  • how effectively the board uses mechanisms such as the annual general meeting;
  • whether the board as a whole is up to date with the latest developments in the regulatory environment and the market;
  • whether sufficient board and committee meetings of appropriate length are held to enable proper consideration of issues; and
  • whether board procedures are conducive to effective performance and flexible enough to deal with all eventualities. 


The CBN Codes

The CBN Code requires an annual formal assessment of the effectiveness of the board as a whole, and the contributions of each individual director (including the chair) to the effectiveness of the board.

The nomination committee recommends an evaluation procedure and proposes objective performance criteria, which are then approved by the board. The issues evaluated should include:

  • individual directors’:
    • attendance at meetings;
    • contributions to discussions at board meetings and board committee meetings;
    • business referrals or other support they provide to the institution;
    • their public standing; and
    • the effects of their standing on the institution’s business; and
  • the institution’s:
    • compliance status;
    • overall performance;
    • regularity of board meetings; and
    • the overall contribution of the board to the institution’s performance.

The CBN Codes for MFBs and FCs provide that an independent consultant must annually appraise board members on all aspects of the board’s structure, composition, responsibilities, processes and relationships. This report must be presented to shareholders in a general meeting and also forwarded to the CBN no later than 31 March of the following year.



The NCCG provides that a board must establish a system to undertake a formal and rigorous evaluation of its own performance and that of its committees, chair and individual directors, facilitated by an independent external consultant, at least once every three years.