Shareholders of Nigeria’s quoted companies and industry experts have reacted to the recent policy by the Central Bank of Nigeria (CBN) on a new tenure limit for banks’ executive management and non-executive directors which unseat prominent industry players.
The apex bank had on February 24, 2023 issued a circular specifying the tenure of Managing Directors (MDs), Deputy Managing Directors (DMDs), Executive Directors (EDs) and Non-Executive Directors (NEDs) of banks and financial institutions, a development that jolted the topmost leadership echelon of the financial services industry.
The guidelines, among other conditions, stipulate that the tenure of EDs, DMDs and MDs shall be in accordance with the terms of their engagement approved by the Board of Directors of the banks, subject to a maximum tenure of ten (10) years.
The policy also prescribed that where an Executive who is a DMD becomes the MD/CEO of a bank or any other DMB before the end of his/her maximum tenure, the cumulative tenure of such Executive shall not exceed twelve (12) years.
The CBN has explained that HoldCo Chief Executives are not affected by the new tenure guideline.
Reacting to the matter, National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Prince Anthony Omojola, commended the CBN for the new policy which he described as a welcome development as it would create room for the younger ones to climb the leadership ladder. He however called for a seamless implementation of the rule to avoid creating challenges in the industry.
“It is a welcome development. Those who have served at the top, with their deputies, for a long period, ought to retire to give room to the younger ones. However, we need to manage the process effectively so that we do not lose experienced hands in the financial services circle,” Omojola said in a note to THEWILL, expressing optimism that the policy would introduce prudence practice and eliminate what he called the culture bad behaviour among the managers.
The National President, Progressive Shareholders Association of Nigeria (PSAN), Mr Boniface Okezie, urged the CBN to rescind the policy. He noted that some of the banks are owner-managed and the apex bank ought not to interfere in the leadership succession process of the institutions. Okezie expressed the concern that the policy could be counter-productive by “killing business” of the industry. The shareholders’ group leader is worried that the new regulation could rob the industry of competent and experienced hands.
Okezie said, “As a stakeholder, I would advise the CBN to jettison the policy because it amounts to interfering with the management of owner-manager financial services institutions who have their own succession plans and policies. I do not think it is part of the CBN regulatory powers.
CBN is to regulate; it is not the owner of the banks. As it stands, we may lose the good hands as many Nigerian professionals are leaving the country in droves for greener pastures abroad.”
The National Coordinator, Pragmatic Shareholders Association of Nigeria (PSAN), Ms Bisi Bakare, sees the policy as one of “robbing Peter to pay Paul”. In a note to THEWILL, Ms Bakare argued that those who founded the banks are investors who should be allowed to reap what they have sown and described the policy as wrong-headed. According to her, it will impact negatively on the confidence that people have in the banks because there are those who invested in the banks because of the leadership character and those at the helm of affairs.
“I do not understand the motive of CBN in creating this policy. They should help in building not to destroy what has been built. The banks are people’s investment. Those who invested in them should be allowed to reap the fruit of their investment. Remember, investors’ confidence is important; those taking over the leadership of the affected banks may not command the confidence enjoyed by their predecessors,” Ms Bakare said in a phone chat.
Doyen of the Stockbrokers and Director at UIDC Securities Limited, Sam Ndata, agreed with the policy on the ground that many of the bank executives have overstayed their relevance and need to leave the system. “It is a good development because many of them have overstayed their relevance and are causing confusion in the system,”.
Dr. Paul Uzum, a Stockbroker and Head of Securities Trading at Planet Capital also believes that the policy is positive. In a note to this newspaper, Uzum said, “It is a good policy that will help to improve corporate governance in these companies, and reduce the influence of owner-manager control on several banks.”
Professor of Economics and Lead Consultant on Private Sector Development to the ECOWAS Commission, Ken Ife, said the CBN directive “is an excellent move”. He argued that the industry has abundance of talents and high level expertise both at home and in the Diaspora working for leading global financial institutions to move the industry to greater heights.
“The new CBN Directive is an excellent move. We have an abundance of talents and high level expertise in Nigeria and Diaspora working with leading global financial institutions. These can move the banking industry to great heights and rapidly embrace the kind of strategic directions CBN has been advocating by investing in digital payment infrastructure and frontiers of best banking practice,” Prof Ike said.
THEWILL had identified some prominent bankers in the executive management and non-executive positions to be swept off by the new CBN’s new tenure guideline which it said was part of measures aimed at strengthening governance practices in the banking industry.
Among them are MD/CEO, Fidelity Bank, Ms Nneka Onyeali-Ikpe, Chairman, United Bank for Africa (UBA), Tony Elumelu; DMD, Zenith Bank, Ms Adaora Remy Umeoji, and MD/CEO, Sterling Bank, Abubakar Suleiman.
Others are GMD/CEO, FCMB, Ladi Balogun, and Chairman, Nova Merchant Bank Phillips Oduoza,
“Non-Executive Directors (NEDs), with the exception of Independent Non-Executive Directors (INED), shall serve for a maximum period of twelve (12) years in a bank, broken into three terms of four years each.
“EDs, DMDs and MDs who exit from the Board of a bank either upon or prior to the expiration of his/her maximum tenure, shall serve out a cooling-off period of 1 year before being eligible for appointment as a NED to the Board of Directors.
“NEDs who exit from the Board of a bank either upon or prior to the expiration of his/her maximum tenure of 12 years (3 terms of 4 years each), shall serve out a cooling-off period of 1 year before being eligible for appointment to the Board of Directors of any other DMB.
“The cumulative tenure limit of EDs/DMDs, MDs and NEDs across the banking industry is 20 years,” the new CBN tenure guideline conveyed in a circular signed by Chibuzo Efobi, Director, Financial Policy and Regulation Department, stated.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
