Corporate Governance in Nigeria Banking Industry
Corporate governance is the process and structures by which the business and affairs of an institution are directed and managed in order to improve the long-term shareholder value by enhancing corporate performance and accountability, taking into account the interest of other stakeholders. Retention of public confidence through the enthronement of public confidence is very crucial given the role of the industry in the mobilization of funds, the allocation of credit to the needy, the payment system as well as the implementation of monetary policy.
Corporate governance is one of the most critical issues in the financial industry across the globe. Failure of the Industry in the past has made it imperative to promote good corporate governance. Financial scandals around the world and the recent collapse of major corporate institutions have brought to fore the need for the practice of good corporate governance.
Poor corporate governance was identified as one of the major factors in virtually all known instances of financial distress in the country. It was against this background that 13-point agenda was introduced during the banking sector consolidation in 2004 thereby enforcing a new code of corporate governance for banks.
The emergence of mega banks in the post-consolidation era task the skills and competencies of boards and managements in improving shareholder values and balance same against other stakeholder interests in a competitive environment and the major area that the corporate governance code seeks to address is the enhancement of the requisite skills and competences of board and management of these banks. In view of the greatly enhanced resources of the consolidated entities, board members may lack the requisite skills and competencies to effectively redefine, re-strategize, restructure, expand and/or refocus the enlarged entities in the areas of change of corporate identities, new businesses acquisitions, branch consolidation, expansion and product development. To ensure that bank directors upgrade their skills and knowledge, the CBN in collaboration with the Financial Institutions Training Centre (FITC) initiated a continuous education programme for bank directors. The programme was aimed at raising the level of corporate governance in the banking sector.The central goals which the programme seeks to serve, include creating a platform for bank directors to continuously upgrade their knowledge on corporate governance, equip the directors with the requisite skills and insights needed to discharge their onerous responsibilities on the boards of their various banks, thereby raising the standard of governance in the sector.
Good corporate governance makes for a more judicious use of resources, it serves the long-term interest of shareholders; it delights and attracts local and international investors. Apart from serving as the catalyst for economic growth, the Nigerian banking industry has acquired some unique features which attract the worldwide attention. Not surprisingly, the sector had led the vanguard in the introduction of change and innovation in business management in Nigeria. Again the performance of our banks in the last two years has given cause to cheer. It is therefore, not surprising to note that the Nigerian banking sector is being asked to champion the efforts being proposed to make Nigeria one of the twenty leading economies of the world by the year 2020.
The code of corporate governance stipulates that the number of non-executive directors should be more than that of executive directors subject to a maximum board size of 20 directors. At least two non-executive boards members should be independent directors (who do not represent any particular shareholder interest and uphold no special business interest with the bank) appointed on merit. The code added that there should be strict adherence to the existing Code of Conduct for bank directors, failing which the regulatory authorities would impose sanctions including removal of the erring director from the board.”.The existence and proper functioning of securities regulators and stock exchanges to enforce rules relating to transparency and disclosure and to strengthen market discipline. The Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (SEC) exercise some regulatory oversights on banks listed on the stock exchange.
Corporate governance must be seen as a vehicle that countries use to attract investors-both local and foreign- and assure them that their investments will be secure and efficiently managed in a transparent and accountable manner.
Corporate governance is one of the most critical issues in the financial industry across the globe. Failure of the Industry in the past has made it imperative to promote good corporate governance. Financial scandals around the world and the recent collapse of major corporate institutions have brought to fore the need for the practice of good corporate governance.
Poor corporate governance was identified as one of the major factors in virtually all known instances of financial distress in the country. It was against this background that 13-point agenda was introduced during the banking sector consolidation in 2004 thereby enforcing a new code of corporate governance for banks.
The emergence of mega banks in the post-consolidation era task the skills and competencies of boards and managements in improving shareholder values and balance same against other stakeholder interests in a competitive environment and the major area that the corporate governance code seeks to address is the enhancement of the requisite skills and competences of board and management of these banks. In view of the greatly enhanced resources of the consolidated entities, board members may lack the requisite skills and competencies to effectively redefine, re-strategize, restructure, expand and/or refocus the enlarged entities in the areas of change of corporate identities, new businesses acquisitions, branch consolidation, expansion and product development. To ensure that bank directors upgrade their skills and knowledge, the CBN in collaboration with the Financial Institutions Training Centre (FITC) initiated a continuous education programme for bank directors. The programme was aimed at raising the level of corporate governance in the banking sector.The central goals which the programme seeks to serve, include creating a platform for bank directors to continuously upgrade their knowledge on corporate governance, equip the directors with the requisite skills and insights needed to discharge their onerous responsibilities on the boards of their various banks, thereby raising the standard of governance in the sector.
Good corporate governance makes for a more judicious use of resources, it serves the long-term interest of shareholders; it delights and attracts local and international investors. Apart from serving as the catalyst for economic growth, the Nigerian banking industry has acquired some unique features which attract the worldwide attention. Not surprisingly, the sector had led the vanguard in the introduction of change and innovation in business management in Nigeria. Again the performance of our banks in the last two years has given cause to cheer. It is therefore, not surprising to note that the Nigerian banking sector is being asked to champion the efforts being proposed to make Nigeria one of the twenty leading economies of the world by the year 2020.
The code of corporate governance stipulates that the number of non-executive directors should be more than that of executive directors subject to a maximum board size of 20 directors. At least two non-executive boards members should be independent directors (who do not represent any particular shareholder interest and uphold no special business interest with the bank) appointed on merit. The code added that there should be strict adherence to the existing Code of Conduct for bank directors, failing which the regulatory authorities would impose sanctions including removal of the erring director from the board.”.The existence and proper functioning of securities regulators and stock exchanges to enforce rules relating to transparency and disclosure and to strengthen market discipline. The Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (SEC) exercise some regulatory oversights on banks listed on the stock exchange.
Corporate governance must be seen as a vehicle that countries use to attract investors-both local and foreign- and assure them that their investments will be secure and efficiently managed in a transparent and accountable manner.
Corporate governance is one of the things that has happened to Nigerian Banking sector...