Evolving Governance Issues: Is the NCCG 2018 due for a review?

Introduction

The Nigerian Code of Corporate Governance (NCCG) 2018 has been a crucial foundation for establishing good corporate governance practices in Nigeria over the past six years. However, the rapid changes in the corporate world, such as technological disruptions, regulatory updates, and global governance standards, require a thorough review and update of the NCCG to maintain its relevance and effectiveness.

Gaps in areas such as technological governance, environmental, social, and governance, as well as emerging governance challenges, including multiple and cross-directorship, have been identified and call for urgent attention.

This paper outlines specific amendments and additions that will strengthen Nigeria’s corporate governance framework, enhance investor confidence, and position Nigerian companies as competitive for foreign investors and for sustainable growth. It also proposes harmonizing the code of corporate governance to meet international best practices. Therefore, to achieve this, the paper compares the current Nigerian Code of Corporate Governance with international standard codes, highlighting where Nigeria can fill its gaps.

Background

The Nigerian Code of Corporate Governance (NCCG) 2018 established comprehensive principles and practices for corporate governance in public and private companies in Nigeria. It was officially introduced on January 15, 2019, by the Financial Reporting Council of Nigeria (FRCN)[2] and sought to promote transparency, accountability, and ethical conduct across the corporate sector. The 2018 Nigerian Code of Corporate Governance was created as an improvement on the 2016 version of the Code, adopting a more inclusive and principle-based approach and therefore aligning with the concept of “Outcome-Based Governance” as discussed by Mervyn King SC and Professor Fabian Ajogwu SAN. The 2018 code simultaneously sought to improve governance within Nigeria’s private and public sectors.

The Code outlines 28 core principles that encompass areas such as board structure, board responsibilities, environmental and social governance (ESG) considerations, whistleblowing, risk management, disclosure of interests, and stakeholder engagement. It also mandates the separation of the role of the Chairman and Chief Executive Officer/Managing Director (CEO/MD), promotes an ethical culture, and encourages board diversity and independence.

Despite the positive changes the NCCG 2018 has brought about, gaps remain in certain areas, including, but not limited to, technological governance, ESG integration, enforcement mechanisms, and the independence of the board. The gaps have raised questions as to whether the NCCG 2018 is still fit for purpose in the current socio-economic and corporate climate.

Is the NCCG 2018 due for a Review?

The NCCG 2018 was established to improve transparency, accountability, and corporate performance across Nigerian organisations. The Code was also to promote public awareness of essential corporate values and ethical practices that will enhance the integrity of the business environment.[7] However, nearly seven years after its introduction, questions have emerged regarding its continued relevance and effectiveness. The primary questions being: Is the NCCG still due for a review?  Does it effectively cater to the current corporate landscape? The answer requires a nuanced examination of the code’s original objectives and Nigeria’s evolving corporate landscape.

At its core, the NCCG was designed to promote the fundamental principles of corporate governance, including accountability, transparency, fairness, and integrity, across Nigerian companies. By adopting a ‘comply or explain’ approach, the NCCG offers a flexible framework for companies to tailor their governance practices to the NCCG principles and remain transparent about any deviations. This framework was intended to promote responsible business conduct, enhance investor confidence, and mitigate corporate failures. In some ways, the NCCG has significantly contributed to the improvement of corporate governance practices in many organisations in Nigeria. Many companies comply with or adopt the principles contained in the NCCG. In addition, various sectors have issued corporate governance-specific guidelines that align with the principles and practices outlined in the NCCG.

However, challenges persist. The NCCG’s principles, while flexible, can be vague, limited in some respects, and susceptible to superficial compliance. For example, principles related to board independence, evaluation, onboarding, education, and diversity are often adopted nominally without meaningful impact on corporate behaviour. The business environment has witnessed an international shift toward organisations consciously integrating environmental, social, and governance considerations, as well as enhancing diversity and inclusion requirements. The current NCCG does not sufficiently incorporate ESG principles or sustainability governance, which are now central to global corporate governance discourse.

Furthermore, following the COVID-19 pandemic, the digital transformation of businesses has accelerated, creating new governance challenges in cybersecurity, data protection, artificial intelligence, and digital board operations. Issues such as digital oversight, remote board effectiveness, and cyber resilience are not robustly addressed in the NCCG. New regulations, including the Nigeria Data Protection Regulation (NDPR), Companies and Allied Matters Act (CAMA) 2020, Investment and Securities Act 2025, as well as sectoral corporate governance guidelines, require alignment with governance practices.

While the NCCG remains a strong guide, it requires significant updates to stay relevant and impactful. Therefore, a review is necessary to respond to the rapidly changing business environment, as the future of corporate governance in Nigeria depends not only on principles but also on robust structures, accountability, and adaptability.

Sectoral Guidelines Highlighting the need for reform of the NCCG 2018

Following the implementation of the Nigerian Code of Corporate Governance (NCCG), notable advancements have been made in corporate governance in Nigeria. The NCCG also clarified that sector-specific corporate governance regulations, which should be referred to as guidelines, should align with the minimum standards provided in the NCCG. While these sectoral guidelines have been instrumental in addressing industry-specific corporate governance challenges, they have also exposed key gaps and limitations within the NCCG.

As a result, various industry regulators in Nigeria are reviewing their sectoral guidelines to address these gaps and ambiguities to the best of their ability. A typical example is seen in the area of digital governance. Technology today has evolved tremendously compared to what it was in 2018 when the NCCG was established. The NCCG makes no reference to data governance and technology oversight; however, the Nigerian Communications Commission Corporate Governance Guidelines for the Telecommunications Industry 2025 have now incorporated elements of digital governance as a proactive step to addressing governance issues that may arise in this context.

Specifically, the NCC Guidelines provide that at least two non-executive directors, one of whom shall be an independent non-executive director, should possess the requisite knowledge and experience in information and communications technology and/or cybersecurity.

In addition, the NCCG 2018 makes minimal reference to ESG reporting, which is now a core element of responsible corporate governance practice. Similarly, provisions of the NCCG on the overall effectiveness of the board, particularly with respect to board onboarding, training, and evaluations, are either too vague or not comprehensive enough to address evolving governance challenges.

As a result, the emergence of sectoral guidelines to address current corporate governance needs underscores that the foundational code is lagging behind the evolving issues in corporate governance, reinforcing the need for a comprehensive review. It is our considered opinion that the NCCG should be reviewed at least once every three years to ensure it continues to address emerging governance concerns. More importantly, the NCCG must adopt a proactive rather than reactive approach to corporate governance issues.

The Review of the NCCG 2018

To conduct a comprehensive review of the NCCG, it is essential to consider developments in various industries within the sector, as well as in other jurisdictions. In this paper, we have reviewed the different sectoral corporate governance guidelines in Nigeria and have noted a dichotomy in some corporate governance practices, which we believe is a result of the silence in the NCCG 2018 on the minimum standard of corporate governance practice required.

We have also made a comparison with practices in other jurisdictions. Specifically, the OECD principles 2023, the UK Code of Corporate Governance 2024, and the King IV report on Corporate Governance for South Africa 2016. The purpose of the comparison is to present a fair insight into the practices of the key areas of corporate governance in other jurisdictions.

It is on the premise of the above that we have been able to identify the gaps and proffer our recommendations for the revised NCCG. The key areas of gap identification and recommended input include:

Currently, the NCCG 2018 lacks a comprehensive principle or recommended practice for technology governance, cybersecurity oversight, and digital transformation management. Given the digital transformations the world is experiencing, there is a need for the introduction of a new principle on “Digital Governance and Technology Oversight.” This principle addresses the recommendation for at least one board member with demonstrated technology expertise or a provision for technology advisory committees. It will also address the need for mandatory board oversight of cybersecurity risks, including quarterly cybersecurity reports and annual cybersecurity assessments.

There is a need for organisations to have a framework for data protection, privacy compliance, and data monetisation oversight that aligns with NDPR requirements. Additionally, a governance protocol should be established for AI deployment, algorithmic transparency, and automated decision-making systems, along with comprehensive guidelines for virtual board meetings, electronic voting, and digital document management, all while maintaining security and compliance.

2. Enhanced ESG Integration

ESG has emerged as a defining imperative in the contemporary business landscape, transcending beyond mere corporate social responsibility to become a cornerstone of organisational strategy. As we stand on the precipice of a new era, the call for sustainable business practices has never been more urgent. The NCCG 2018 currently only recommends that companies file corporate governance reports that highlight ESG initiatives, along with a statement from the company’s board on its ESG activities. We acknowledge the ‘Roadmap Report for the Adoption of IFRS Sustainability Disclosure Standards in Nigeria,’ issued by the Financial Reporting Council of Nigeria (FRCN).  We also recognize that this report aims to establish a roadmap for the timely and effective implementation of the IFRS Sustainability Disclosure Standards (ISSB Standards) and to support their adoption through advocacy and engagement. We are currently in a period of voluntary adoption until 2027. Therefore, it is crucial that before entering the mandatory adoption phase, the NCCG incorporates comprehensive principles that guide environmental, social, and governance (ESG) practices and reporting requirements.

Furthermore, the NCCG should recommend that companies report on climate-related financial disclosures in line with the IFRS Sustainability Disclosure Standards. Companies should also include information about their community impact, employee welfare, and social responsibility initiatives in their corporate governance reports.

3. Cross and Multiple Directorships

Cross-directorship, also referred to as interlocking directorship, occurs when a relationship exists between the boards of directors of two entities because a number of directors sit on both boards. Multiple directorships occur when one director sits on multiple boards. The NCCG does not define the concept of cross directorship, nor does it have recommended practices addressing the practice of cross directorships. On the other hand, there is no detailed provision addressing the issue of multiple directorships. It is recommended that, to safeguard the objectivity and independence of the Board, cross-directorships on the boards of two or more companies should be discouraged, especially where they involve INEDs. In addition, multiple directorships, particularly on boards of public companies, should be limited to 4 boards where persons already serve as Executive Directors on a board.

4. Board Effectiveness and Professional Development

There is a limited focus on continuous board development and evaluation of effectiveness. Annual evaluations on board effectiveness should be conducted, including external evaluation requirements, on an annual basis.  There should be standard minimum metrics for corporate governance and board evaluations. There should be mandatory continuing education requirements for directors on governance, industry-specific developments, and regulatory updates, especially for directors in public companies and directors of private companies that are not small. A robust succession planning requirement for the board chairman and the CEO/MD should also be submitted alongside corporate governance reports on an annual basis.

Recommended Inputs in the Nigerian Code of Corporate Governance 2018

Chairman

CEO

INED

NED

ED

External Auditors

a. Chairman: The tenure of the Chairman shall not exceed 12 years.

b. MD/ CEO: The tenure of the MD/CEO shall be subject to the terms of engagement with the Company; however, it shall not exceed 10 years.

c. INED: The tenure of independent non-executive directors shall not exceed 9 years.

d. NED: The tenure of non-executive directors shall not exceed 12 years.

e. ED: The tenure of executive directors shall be subject to their terms of engagement with the Company; however, it shall not exceed 10 years.

f.External Auditors: The tenure of external auditors should be a maximum of 10 years.

Internal

External

Internal board evaluation should be done on a bi-annual basis (June and December of every year)

External board evaluation should be done once every 2 years by an independent external consultant

There should be annexure, with a template containing minimum metrics for board evaluation

Risk Management and Compliance

The Board shall consider other Directorships held by such prospective nominee to determine whether the prospective nominee can contribute effectively to the performance of the Board.

NEDs and EDs are prohibited from being reclassified into INEDS

NEDs can be reclassified into EDs after serving a 3-year cooling period

EDs may be classified into NEDs, however, this should be seldomly done to maintain the independence of board members.

Conclusion

The proposed review of the Nigerian Code of Corporate Governance will be a critical step forward in strengthening Nigeria’s corporate governance framework. The comprehensive nature of this revision addresses contemporary governance challenges while positioning Nigerian companies for sustainable growth in an increasingly complex global business environment.

This insight has identified specific areas where the current Code requires enhancement to remain relevant and effective. The proposed amendments, particularly in areas of digital governance, ESG integration, and cross/ multiple directorships, reflect global best practices while addressing Nigeria’s unique business environment and regulatory landscape.

The successful implementation of these amendments will require strong collaboration among regulatory bodies, companies, investors, and governance professionals. However, the expected benefits, including enhanced investor confidence, improved corporate performance, and strengthened economic stability, justify the investment required for implementation.

Authors:

Nimma Jo-Madugu

Abasiemediong Etuk

Jessica Obodo-Elue

Nnaedozie Ajogwu

KENNA is a full-service law firm with a client-first approach, delivering bespoke legal solutions across diverse sectors, both locally and internationally.

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