On the 15th of January 2019, the Federal Government of Nigeria unveiled the Nigerian Code of Corporate Governance 2018 (Code), which is aimed at institutionalizing best practices in corporate governance in Nigeria in order to restore confidence in the Nigerian economy and create an environment for sustainable business operations.

The Code provides a framework “to ensure good corporate governance practices in the public and private sectors of the Nigerian economy….” by articulating a broad set of principles on corporate accountability, transparency and sustainability for both public and private companies in Nigeria.

In the past, there were five sectoral codes of conduct, namely:

  1. Code of Corporate Governance for the Telecommunication Industry 2016, issued by the Nigerian Communications Commission (replacing the 2014 Code);
  2. Code of Corporate Governance for Banks and Discount Houses in Nigeria 2014 issued by the Central Bank of Nigeria (replacing the 2006 Code);
  3. Code of Corporate Governance for Public Companies in Nigeria 2011 issued by the Securities and Exchange Commission (replacing the 2003 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.

In other words, there was no uniform corporate governance standard for all companies and across all business sectors, and the companies were made subject to the codes of corporate governance applicable to the sectors in which they operate, thereby making some companies subject to more than one corporate governance regime. 

However, the Code, recognizing the importance of flexibility and scalability to the implementation of such cross- sectoral and non-company-size-specific Code of its nature, applies a principle-based approach to specifying the minimum corporate governance expectations placed on companies.

Although the Code does not void sector specific codes of corporate governance, one can conclude that where standards as prescribed in the sector related code concerning any issue covered by the Code is lower than that specified under the Code, companies affected must adhere to the higher standard of the Code, and where standards as prescribed in the sector related code are higher than the provisions in Code, those higher standards must be followed, the Code after all, only sets minimum standards. What is uncertain however, is how to address cases of obvious conflict between the Code and the sectoral codes.

For effectiveness, the Financial Reporting Council of Nigeria (FRC) has the mandate to monitor the implementation of the Code and is empowered to issue guidelines towards the implementation of the Code by the sectoral regulators.  

There are twenty-eight (28) broad principles laid down by the Code, sixteen (16) of which relate to the Board of Directors and Officers of the Board (addressing diverse board related issues including composition, key functions, meeting, induction, delegation of duties, and evaluation); 4 concerning risk management, whistle blowing and audit processes (together titled Assurance); 3 on relationship with shareholders (reiterating the importance of general meetings, communication with and equitable treatment of shareholders); 2 on ethical conduct of business (which extol establishment of policies and mechanisms for monitoring insider trading, related party transactions, conflict of interest and other corrupt activities); 1 on sustainability (pushing for the adoption of environmental and socially sustainable business practices), and 2 on transparency (addressing stakeholders communication and disclosure of material information).

To avoid robotic implementation of the Code and ensure that companies do not lose sight of the goal of the governance principles, the Code requires, in certain circumstances, that companies adopt the “Apply and Explain” principle, which requires that companies not only apply the governance principles, but also explain how their specific conducts fulfil the objectives of the governance principles. However, companies are at liberty to tailor suggested practices under the code to meet specific industry or company needs. In other words, strict adherence to the principles of corporate governance stipulated under the Code takes precedence over practices suggested under the Code for compliance with the principles.

Below are some of the major suggested practices under the Code and the expected implications.


As previously stated, the Code is now of general application to all types of companies regardless of their size and sector or specialization. The implication is that all companies are bound by the provisions of the Code, thus there is an expectation of a fully structured board and organizational structure. In line with best corporate practice, the Code now recommends a mix of executive directors (EDs), non-executive directors (NEDs) and independent non-executive directors (INEDs) on the board of a company. Companies can determine the size and composition of their board subject to the requirement of their sectoral codes.

Companies would need to adopt policies that allow for review of existing Board composition to ensure it reflects an appropriate balance of competence, independence and integrity. 

It is the recommendation of the Code that the Chairman of the Company should provide leadership and not be involved in the day to day running of the Company. Thus, in line with best corporate practice, the position of the Chairman should be separated from the Executive Directors of the Company through the instrumentality of a Board Charter which defines clearly the roles and responsibilities of the directors of the Company.   

The Code discourages the transition of the Chairman of the Company to the position of Managing Director/Chief Executive Officer of the Company. It provides that a period of three years break from the Company should be allowed for a Chairman that transits to the position of MD/CEO. However, there will be need for such incoming MD/CEO to be updated on relevant skills, knowledge and changes in the Company to ensure effective management of the Company upon assumption of the role.

The Code also prescribes criteria for establishing independent status of an Independent Non-Executive Director (INED) in order to ensure the INEDs are independent in character and judgment. In line with best corporate practice, the independence of the INEDs will be evaluated on the following criteria recommended by the Code that INEDs cannot:

  1. Have shareholdings in excess of 0.01% of the Company’s paid up capital; although some sectoral requirement prohibits INEDs from holding shares of the company.
  2. Serve as employees of the company or its related companies within the preceding five years;
  3. Have a material relationship with the Company directly or indirectly within the preceding five years;
  4. Have a close family member who has served as a director, senior employee, creditor, supplier, customer and substantial shareholder of the company;


The role of the company secretary is to provide effective guidance and support to the Board of the company. The code requires that the company secretary should be empowered by the Board to effectively carry out its function. Although the company secretary should not be part of the Board, the appointment, removal and performance evaluation of the company secretary must be approved by the Board.


The code recommends the establishment of committees responsible for nomination and governance remuneration, risk management and audit whose members should be non-executive directors (NEDs). Committee reports on their deliberations are expected to be presented to the Board during quarterly meetings by the Chairman of each Committee. It follows that companies, especially banks and financial institutions whose Board Committee members are executive directors (EDs) will have to review the composition of the Board Committees in such a way that reflects skillsets in risk management, audit, etc. and are non-executive directors (NEDs) of the company.


The code recommends additional responsibility for the audit committee which is to ensure the development of comprehensive internal control framework and report annually in the audited financials on the design and operating effectiveness of the company’s internal controls over financial reporting. 

The Code requires that there is need to ensure that the internal control over financial reporting are adequately designed to substantially reduce the risk of misstatements and inaccuracies in the company’s financial statement.


Enterprise data, including its availability, integrity, confidentiality and overall security is key to risk management and as such the code recommends that the risk management committee should be responsible for reviewing and updating the IT governance architecture of the company on an annual basis and report to the Board for approval. The key considerations of the review would be whether:

  1. adequate structures exist to implement the IT governance practice;
  2. measures are in place to ensure data availability, usability and accuracy to enhance decision making by management;
  3. data privacy, access control and information security controls are in place while ensuring compliance with existing regulatory, contractual or internal requirements for data.
  4. Data flows seamlessly as a result of the complex system integration at various levels of IT architectural layout.   


The code recommends that the tenure of the INEDs should be limited to three terms of three years to enable periodic refreshing of the Board. Therefore, the policy or Board charter should define the tenure of EDs and INEDs with provision for the evaluation that takes into account performance, the existing succession planning mechanism, continuity of the Board and the need for continuous refreshing of the Board. There is also the requirement by the Code that the duration of appointment of external audit firms should not exceed ten (10) years and if it does such should come to an end at the next general meeting of the company from the date the Code becomes effective.


The Code requires the Board and Board Committees performance and the implementation of the governance evaluation to be conducted annually with the use of independent consultants However, companies that choose to conduct the evaluation internally would have to develop rigorous objective processes to achieve an objective and credible result.

The Code requires that the summary of the report of the evaluation should be included in the annual report of the company and investors report.


The Code requires companies to not just disclose the remuneration of directors but to disclose the policy underpinning the remuneration, such that it can be seen as justified and supportive of the underlying and strategic objectives of the company.


The Code requires companies to review the remuneration structure to discontinue the practice of providing sitting allowances for Boards and Board Committees and giving undeserved rewards to directors and senior employees. The Code recommends for a claw back policy to recover the undeserved payments to directors and senior employees of companies.


The Code requires that the external auditors and partners’ tenure must be limited to ten (10) years after which a new set of partners and external auditors are appointed. It follows that the audit committee of a company have an obligation to monitor the tenure of external auditors in order to ensure compliance with the Code. The Code requires that in order to preserve the independence of the engagement partner, there should be a rotation of the audit engagement partner every five years and at least a period of three years between retirement from the audit firm and appointment to the Board of the company. Similarly, a member of the audit team would be required to have a cooling off period before joining the staff of the company.


The Code requires that companies should have a clear risk management policy which defines the risk management framework of the company and the extent of risk appetite the company may tolerate and ways of safe-guarding shareholders’ assets.

The Code also requires companies to have a whistle blowing policy to support the disclosure of corrupt and related unethical conducts in order to minimize the company’s exposure to reputational risk. The Code requires the anonymity of the whistle blower to be protected otherwise such would be entitled to compensation.


The Code underscores the need for robust shareholders relationship with the Board of the company through the platform of General Meetings, in order to facilitate greater understanding of the company’s business, governance and performance standards while enabling them to exercise their ownership rights and express their views to the Board on any areas of interest.

The Code reinforces the concern for engagement with shareholders through regular dialogue to balance their interest and expectation with the objectives of the company. For this purpose, best corporate practice requires that the Board formulates policies that will endanger such regular dialogue. Ideally such policies should be developed to reflect a balanced understanding of shareholders’ issues and should be hosted on the company’s website.  


This principle reiterates a critical corporate governance requirement of treating shareholders fairly and equitably, particularly with regards to protecting minority shareholders from the abusive actions of the controlling shareholders of a company.

Thus, the Code mandates directors to act in good faith and with integrity in the best interest of all shareholders, while providing adequate information to shareholders to enable them make informed investment decisions.


This principle as espoused by the Code reiterates the imperative of protecting the reputation of companies through good conduct in order to enhance investor confidence. The principle therefore enjoins the Board of companies to formulate Code of Business Conduct and Ethics in order to model a top-down commitment to professional business and ethical standards, from Board and management level to employees, contractors, suppliers, etc. to drive professional and ethical behaviors in their dealings with the company. 

The Code requires that ethical policies should be formulated to monitor conflict of interest situations in order to prevent corrupt practices in companies. The Code therefore requires that transactions between related parties that are likely to result in conflict of interest with the company must be disclosed, prior to the execution of the transaction. The principle underpinning the Code further mandates that no person appointed at directorate level of a regulatory institution should be appointed as Director or top management staff of a company or institution that is under the supervision of the relevant regulatory institution, until after three years of disengagement of the person from the relevant institution.


This principle underscores the need for Board of companies to give adequate attention to sustainability issues such as Environmental Social and Governance (ESG) responsibilities/activities. It requires globally reporting standards to be followed in reporting such activities, as this will effectively reflect the company as a responsible entity.

Companies are also required to have a communication policy to engage with stakeholders and have a duty of disclosure of any relevant information to the stakeholders of the company.


While it may be too soon to evaluate the impact of the Code in the Nigerian corporate space, there is no gainsaying the fact that there will be need for considerable readjustment, especially for those companies that have very low or zero corporate governance practices. On its end, the Code is conspicuously silent on its commencement date, and makes no recommendations for transition mechanisms. While the omission on when it is supposed to become operative may have the effect of making companies lackadaisical, taking their time with implementation, the lack of suggested transition mechanisms does not help small and medium sized companies that may not have operative corporate governance practices and may not be able to afford the services of experts to aid their transitioning to governance compliance in line with the Code and international best practice.