The Central Bank of Nigeria (CBN) has called on banks to secure its approval before appointing a new successor to the position of managing director six months before the exit of an incumbent, as provided in the corporate governance guidelines.
It issued the directive in a circular signed by the Director of Financial Policy and Regulation, Rita Sike, on Tuesday, September 16 and addressed to all Domestic Systemically Important Banks (DSIBs).
The apex bank said similarly that such appointments must be made public at least three months before the outgoing managing director leaves office.
Consequently, and in line with good corporate governance practice, CBN stated that each DSIB is hereby required to:
“Ensure it obtains regulatory approval for the appointment of a successor Managing Director (MD/CEO) not later than six months before the expiration of the tenor of the incumbent MD/CEO.
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“Publicly announce the appointment of the successor MD/CEO not later than three months before the planned exit of the incumbent MD/CEO. Please ensure strict compliance.”
According to the CBN, the directive is intended to strengthen corporate governance and reduce uncertainty in Nigeria’s banking sector.
It cited Section 2.14 of the Corporate Governance Guidelines issued in 2023, which mandates boards of commercial, merchant, non-interest, and payment service banks to maintain succession plans for their top leadership.
“This requirement seeks to minimise disruptions at the top management level, enable top management appointees to prepare adequately for their new roles, and generally mitigate risks associated with abrupt changes in leadership,” the CBN stated.
It said DSIBs play a vital role in the financial system and could trigger wider instability if leadership transitions are not properly managed, stressing that compliance with the rule would bring Nigeria in line with international best practice.
Pinnacle Daily reports that the recent realignment as done by Access Bank Group, where the holding company appointed Innocent Ike as its substantive group managing director following regulatory approval, was a case in point as complying with the provision in the corporate governance guidelines.
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Roosevelt Ogbonna, who previously held the position, had resigned after serving for three and a half years, to allow Access Holdings to comply with the CBN corporate governance guidelines for Financial Holding Companies in Nigeria, 2023, which stipulate a maximum of nine directors for the board of a Financial Holding Company.
Pinnacle can report that Adesola Adeduntan’s abrupt resignation as the managing director/chief executive officer of First Bank of Nigeria Limited (FirstBank) eight months before the expiration of his tenure seems to have violated the CBN corporate governance guidelines.
His resignation in April last year elicited concerns among relevant stakeholders in the financial sector.
Specifically, Section 1.18 of the corporate governance guidelines states that “In the event a director elects to resign his appointment on the Board of a bank, such director shall submit a written notice of resignation addressed to the Chairman of the board ninety (90) days before the effective date of resignation.”
Section 1.20 adds, “Where a director elects to resign from the Board on account of unresolved concerns pertaining to the running of the bank, such director shall detail the concerns in a written statement to the Chairman for circulation to members of the Board.”
With these provisions, it thus appears that Adeduntan’s abrupt resignation and his decision to proceed to immediate retirement flouted the CBN rules.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
