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FRC, private sector fine-tune corporate governance code


Olusegun Oshinowo, NECA Director General.

Olusegun Oshinowo, NECA Director General.

The nation’s Organised Private Sector, OPS, has pledged to collaborate with the Financial Reporting Council of Nigeria, FRC, in fine-tuning the recently released, National Code of Corporate Governance, NCCG, to ensure it becomes the guiding rules for businesses in the country.

Corporate governance involves balancing the interests of a company’s many stakeholders, including shareholders, management, customers, suppliers, financiers, government and the community.

It also provides the framework for attaining a company’s objectives, from action plans and internal controls to performance measurement and corporate disclosure.

The collapse of organisations in either the public or private sectors in Nigeria, has often been attributed to weak corporate governance with regard to undue interferences, lack of disclosures, padding of books and general corruption in the system.

As such, the FRC Code among others seeks to promote the highest standards of corporate governance, encouraging sound systems of internal control to safeguard investments, while also promoting sound financial reporting and accountability in both the public and private sectors of the economy.

But the release of the Code on October 17th generated a lot of controversies among stakeholders, particularly capital market investors, who felt the Code was at variance with the Companies and Allied Matter Act, CAMA, so much that it was suspended until it was fine-tuned.

Accordingly, the OPS, comprising the Nigeria Employers’ Consultative Association (NECA), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), and Manufacturers Association of Nigeria (MAN), weekend, sought further clarifications on certain aspects of the code, while pledging to support the FRC on it.

Speaking during a courtesy visit to the Council’s headquarters in Lagos, the Director General, NECA, Olusegun Oshinowo, who led the delegation, said the body was in support of the NCCG, which is to ensure transparency, accountability and fairness to all stakeholders in the business sector of the economy.

According to a statement from the FRC, he also commended the Council for the way and manner it allowed for robust social dialogue on the NCCG through the series of public hearings and seminars it organised to get inputs from stakeholders before the code was eventually released.

Oshinowo, however, noted that to ensure a wider acceptability, there was the need for continuous social dialogue and improvements on the Code to reflect current realities in Nigeria.

He highlighted some of the grey areas in the Code, for which they sought clarifications to include transitional time for the enforcement of the code; the number of non-executive directors to be appointed into companies’ board; constitution of Joint Audit by entities with at least N10billion capital and appointment of consultants.

He urged the FRC to look into these with a view to addressing them in such a way that the inputs of the stakeholders would reflect in the code.

Responding, the Chief Executive Officer of the FRC, Mr. Jim Obazee, was quoted to have said that the Council was working tirelessly with stakeholders to ensure the code yields the desired result of entrenching transparency and accountability in the transaction of businesses.

He also emphasised the need for more disclosures in financial statements in order to build investors’ confidence in the nation’s business environment.

He noted that some of the giant strides the FRC made in the past which were hitherto criticised in the beginning were later commended for achieving the desired results.

Among them were “the adoption of International Financial Reporting Standard, IFRS, as benchmark for stating financial statements in the country; and the issuance of FRC registration numbers to those who sign entities’ accounts to give credence to the accounts.”

This, he said, is to ensure that in the event of any mis-statements, such individuals are “held responsible through suspension of their numbers instead of the entire organisations they represent,” the statement read.

Obazee was said to have assured the delegates that the areas they have raised issues about would be looked into, as the code goes through further restructuring.

Noting that since the code was not a law, he said: “it would not require rigorous process of amendment if there are genuine reasons for it to be re-jigged for the general good of the nation’s business environment.”

The Chairman, Steering Committee of the NCCG, Victor Odiase, was also quoted to have said that corporate governance codes world over-determine the critical destination of investments, and decried the high level of business ownership concentration in the country.

He said: “if we must attract the desired local and foreign investments to move the country’s economy out of recession and make the economy a vibrant one, there is need for deliberate efforts to de-concentrate entities’ ownership, which the corporate governance code focuses on addressing as one of the key areas to attract investors.”

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  • Curtx Maccido

    The National Code on Corporate Governance is commendable and should be embraced (though some reconciliations with the Act are required), I am particularly excited about the complying section of having private firms joint audited by an international and NATIONAL audit firm – depending on market capitalization and turnover. However since Nigeria economy is public sector driven, shouldn’t we be focusing on the PUBLIC SECTOR governance? I am particularly interested in the EXTERNAL REPORTING section where it looks so much like status quo based on the functions of the Auditor-General of the Federation and those of the States, when independent external auditor should have been introduced to ensure the public sector benefited from the role of external and independent reporting on its governance. In all, i believe it is a good start!

    • Life is Good

      Public Sector is where the major mess lies and that’s where they should start first.

  • McLeish Otuedon

    The National Code of Corporate Governance (NCCG) when compared with King III of South Africa (not even comparing to that of the U.K., Netherlands, France and other European countries) in terms of stringent principles, the NCCG is less stringent and still has a lot of catch-up to do. For example, King III requires the Chairman of the board to be an Independent Non-Executive Director (Para 2.16), and where the Chairman is not independent, then a lead independent director must be appointed (Para 2.16.3). King III also requires the position of the Chairman of the board to be put up for election on an annual basis (Para 2.16.1). It is also important to state that King III also requires shareholders to pass a non-binding advisory vote on the company’s remuneration policy (which is referred to as Say-on-Pay) on a yearly basis (for more details on the extent to which the world has advanced on Say-on-Pay, read my journal article on Say-on-Pay by clicking on this link) ( . The NCCG released on October 17, 2016 does not even contain such stringent best practice requirements, which shows that the NCCG and members of the Steering Committee on the NCCG took into consideration the evolving nature and “low level” of Corporate Governance maturity and sophistication in Nigeria. But, we cannot remain at the low maturity and sophistication level for too long because there is a high correlation between entrenching sound corporate governance and the antecedents of economic and business prosperity (how foreign investors perceive the Nigerian business environment, the level of trust and therefore foreign direct investment to channel into Nigeria, assurance on corporate accountabilities, willingness to do business with Nigerian entities as a result of openness and transparency which could significantly improve the ease of doing business in Nigeria and with Nigerians, etc.)

    My humble plea is for all relevant and critical stakeholders of the NCCG to allow the Code to run, and this shouldn’t prevent conversations and discussions from continuing. If we want to be prosperous as a Nation, then, we must do those things prosperous nations do. If South Africa can have a world-class best practice Code of Corporate Governance that is one of the highly referenced and cited Codes amongst global Corporate Governance scholars and professionals, then why should the giant of Africa, Nigeria, be foot-dragging? There is no perfect Code anywhere in the world; not even the U.S. Sarbanes-Oxley Act of 2002 (“SOX”) nor the UK Code of Corporate Governance. When SOX was enacted in 2002, it took a one-size-fits-all approach, with attendant costs on smaller companies. However, in 2010, Sections 404b was amended by Section 989G of the Dodd-Frank Act (of 2010), which introduced Section 404(c) into SOX to exempt non-accelerated filers (smaller companies). Section 103 of the JOBS Act 2012 further amended Section 404(b) of SOX to exempt emerging growth companies. Similarly, the UK Code of Corporate Governance (formerly called the Combined Code of Corporate Governance until 2010) has undergone many reviews since the Cadbury Committee Code of 1992. In fact, the UK Code is reviewed every two years and sometimes earlier (1998, 2000, 2003, 2006, 2008, 2010, 20012, 2014, and currently undergoing review) to introduce relevant and necessary changes.

    Furthermore, the controversy or debate of whether the NCCG should be mandatory or voluntary ought not to have arisen at all as there is a clear evidence that voluntary Codes that were issued in the past in Nigeria did not achieve the desired results. To put it in another way, many a Nigerian were not aware that some of the voluntary Codes issued in the past existed (e.g. the Peterside Code of 2003; the Bankers’ Committee Code of 2003). However, it was evidently clear that the CBN Code of Corporate Governance (Post Consolidation) 2006, which was made mandatory, caused significant positive governance impact in the Banking Industry. The 2014 revised CBN Code of Corporate Governance, which also took a mandatory option, is doing fairly good. For me, there are bigger governance issues to discuss. Why should we continue on a path as a people that has not benefited us? There is popular quote that “doing the same thing over and over again and expecting different results is insanity” (Albert Einstein). So, why should we take the path of voluntary compliance when we know what the outcome would be? Any Regulation or law that provides voluntary option in Nigeria is tantamount to not having that Regulation or law at all. For instance, one major debate in Nigeria soon after President Buhari’s government was inaugurated in 2015 was whether or not our politicians should declare their properties, assets and liabilities and those of their spouse and unmarried children (under the age of twenty-one years) to the Code of Conduct Bureau publicly. Although Nigerians have been clamouring for politicians to declare their assets publicly since the commencement of President Buhari’s Administration, which is now a common occurrence whenever there is a new government in Nigeria, but majority of politicians, even from time immemorial, have never been interested in heeding to this call simply because Section 15 of the Code of Conduct Bureau and Tribunal Act Cap. 15 of LFN 2004 did not mandate them to do so. Those who have declared their assets publicly have done so voluntarily and they are very few. So, this is another example to demonstrate that unless it is expressly stated and mandated, it is likely not to be voluntarily applied. Voluntary compliance is not a Nigerian culture yet. Yesterday, I saw Channels Television celebrating 21 quality years and I was excited; but let us not forget that many television networks came around before Channels. In the same manner, once upon a time we had a National Carrier that was our pride, but today what we see is Arik and others. Also, once upon a time we had a major telephone company, but today what we see is Glo, MTN, Airtel, Etisalat, and others. We can go on and on and on, but this is enough.

    Finally and thus, if the voluntary path did not work in the past and stakeholders have brainstormed (lead by the Steering Committee on the NCCG) and even held public hearings on several versions of the draft NCCG, why should the Nation be held down? The world is watching us and any further delay on the NCCG is viewed as an embarrassment to not only the members of the Steering Committee who dedicated their time and resources into the NCCG, the Financial Reporting Council of Nigeria, the Nigerian business community, the Nigerian people, but most especially the current government who wants to and continue to promise the international community of its intention to create an enabling environment for foreign investors. That enabling environment actually starts with the operationalization of an effective Code such as the NCCG that the world believes in. Thank you.