The federal government in January this year unveiled the Code of Corporate Governance for all companies operating in Nigeria.
The new code was drafted by the Financial Reporting Council (FRC), an agency under the supervision of the Federal Minister of Industry, Trade and Investment, was unveiled by Nigeria’s vice president, Prof. Yemi Osinbajo at an event in Abuja in January.
The code, which is expected to take effect on January 1, 2020, seeks to address issues relating to the composition of boards of companies, relationship with shareholders, sustainability, and assurance among other others
The new code seeks to address issues relating to the composition of boards of companies, relationship with shareholders, sustainability, and assurance among other others.
The new Code of Corporate Governance applies to all companies under the FRC Act.
Essence of the new code of corporate governance 2018
The Code seeks to “protect minority shareholders rights, attracting and retaining foreign investments, as well as enhancing ease of doing business.”
The new code, according to the FRC, “seeks to institutionalise corporate governance best practices in Nigerian companies, to promote public awareness of essential corporate values and ethical practices that will enhance the integrity of the business environment and rebuild public trust and confidence in the Nigerian economy, thus facilitating increased trade and investment among others.”
Prof Osinbajo while unveiling the new corporate ethics, said it will help the country to minimise wastage and corruption.
“With the launch of the code, Nigeria is taking a big stride to become a preferred place for investment and will help minimise wastage and corruption.”
Minister for Industry Trade and Investment Dr. Okechukwu Enelamah, in his remarks noted that Corporate Governance defines the quality of the market.
“Good governance instills investor confidence and instigates rapid growth in corporate markets. The investment decisions taken by the local and international investors are stimulated by good Corporate Governance practices. As corporations compete to attract capital from international markets, investors assess the companies using numerous factors such as sustainable track records and use of good Corporate Governance principles. Hence, Nigerian Companies need to adhere to good Corporate Governance practices and standards to gain competitive edge required to survive in competitive and dynamic markets. Good governance standards are essential to ensure transparency of capital markets, protection of minority shareholder rights, as well as to attract and retain Foreign Direct Investments (FDIs),” Enelamah stated.
The minister enjoined all economic participants to promote and enforce good Corporate Governance practices.
According to him, to reap the maximum benefits of Corporate Governance Codes and Systems, it should be a practice embraced by all, as an avenue for value creation and sustainability.
“I call upon the Government, Private Sector, the Civil Society, and specifically to the institutions established with the objective to promote Corporate Governance, to take a wider and more active role in achieving this objective,” the minister said.
In 2016, the financial reporting council released three draft Codes of Corporate Governance for Private Companies, Public Companies and Not-for-Profit Entities.
The draft Code for Not-for-Profit entities generated a lot of controversies as it affected religious institutions and their general overseers.
The Codes were suspended as a result of the controversy after the release.
In 2018, the regulatory agency drafted a new Code that consolidates the Codes for private and public companies while the Code for Not-for-Profit companies’ remains suspended.
Here are key highlights from the New Nigerian Code of Corporate Governance 2018:
- The Code consists of seven (7) parts and twenty-eight (28) principles together with practices recommended by the Code for the implementation of each principle.
- The Board ensures that the Company remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.
- The Code recommends an effective whistle-blowing framework for reporting any illegal or unethical behaviour to minimise the Company’s exposure and prevent recurrence.
- Appointment of an external auditor to provide an independent opinion on the true and fair view of the financial statements of the Company and give assurance to stakeholders on the reliability of the financial statements.
- Pay due adequate attention to sustainability issues including environment, social, occupational and community health and safety by ensuring successful long term business performance and projects of the Company as a responsible corporate citizen contributing to economic development.
- Full and comprehensive disclosure of all matters material to investors and stakeholders, and of matters set out in the new Code, ensures proper monitoring of its implementation which engenders good corporate governance practice.
- Corporate organisation must ensure transparency by communicating and interacting with stakeholders to keep them conversant with the activities of the Company and assists them in making informed decisions.
- The Code applies to all Companies as there is no distinction between Private Companies and Public Companies or Public Interest Entities under the FRC Act.
