Central Bank of Nigeria Extends Bank Directors’ Tenure, Introduces Gender Diversity Requirements


Corporate Governance Guidelines for Commercial, Merchant, Non-interest, and Payment Service Banks in Nigeria,” the Central Bank of Nigeria (CBN) announced an extension of the tenure for Managing Directors/Chief Executives and Deputy Managing Directors/Executive Directors of banks. The circular, dated July 13, 2023, aims to provide additional guidance on corporate governance principles while promoting gender diversity and high ethical standards within the banking sector.

Under the new guidelines, the tenure for Managing Directors/Chief Executives of banks has been increased from a maximum of 10 years to 12 years. The same extension applies to Deputy Managing Directors/Executive Directors. These changes are aligned with the objectives of the Nigeria Code of Corporate Governance (NCCG) 2018, which emphasizes industry-specific standards and the enhancement of public confidence.

To ensure gender diversity on bank boards, the CBN mandates that no board shall consist of only one gender, in line with Principle 4 of the Nigerian Sustainable Banking Principles (NSBP). Banks are encouraged to adopt practical measures for women’s economic empowerment, fostering a gender-inclusive environment.

The issuance of these guidelines by the CBN follows the directive of the Financial Reporting Council of Nigeria (FRCN) for sector regulators to develop sector-specific corporate governance guidelines. In formulating the guidelines, the CBN adapted the principles and recommended practices of the NCCG 2018, taking into consideration the unique characteristics of the banking sub-sector.

The CBN’s regulatory authority for issuing these guidelines stems from the CBN Act 2007, as well as the Banks and Other Financial Institutions Act (BOFIA 2020), specifically Sections 2(d), 56(2), and 67(1).

Key provisions within the guidelines include a cumulative tenure limit of 12 years for Executive Directors (EDs), Deputy Managing Directors (DMDs), and Managing Directors/Chief Executive Officers (MD/CEOs). Non-Executive Directors (NEDs), excluding Independent NEDs, are allowed a maximum tenure of three terms, each lasting four years.

To maintain independence, proposed NEDs should not be employed by any financial institution unless representing the interests of the promoting institution. Additionally, executives who exit from the board before or upon reaching their maximum tenure are subject to a cooling-off period of two years before becoming eligible for appointment as NEDs in the same bank, subject to cumulative tenure limits.

Furthermore, the cumulative tenure limit for directors (EDs, DMDs, MD/CEOs, and NEDs) on the board of the same bank is set at 24 years, calculated from the date of their initial appointment.

In a bid for transparency, the guidelines stipulate that banks must disclose a summary of their risk management policies in their annual financial statements, with publicly quoted banks required to host such summaries on their websites.

For Financial Holding Companies (FHCs), NEDs, including the Chairman (excluding Independent NEDs), are allowed a maximum tenure of three terms, each lasting four years. The cumulative tenure limit for NEDs in FHCs or any other FHC is set at 12 years.

Independent Non-Executive Directors (INEDs) in FHCs are required to possess comprehensive knowledge of the operations, relevant laws, and regulations governing the subsidiaries within their respective sub-sectors. They must also demonstrate expertise and competency in their field. The term of office for INEDs is four years and can be renewed for one consecutive term of four years.

The CBN’s new guidelines aim to strengthen corporate governance practices in Nigerian banks while fostering diversity and upholding ethical standards. By extending tenures and promoting gender inclusivity, the CBN seeks to enhance the stability and effectiveness of the banking sector in Nigeria.

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