The Central Bank of Nigeria (CBN) has introduced a game-changing directive requiring Domestic Systemically Important Banks (DSIBs) to secure regulatory approval for the appointment of a successor CEO six months before the current chief executive’s exit. Additionally, these banks are mandated to publicly announce the new appointment at least three months before the incumbent’s departure.
The move, which was communicated in a circular signed by Dr. Rita Sike, Director of Financial Policy and Regulation, is aimed at promoting stronger corporate governance within Nigeria’s banking sector, reducing leadership uncertainty, and bolstering confidence in the financial system. The directive comes at a time when leadership transitions at major banks have been under intense scrutiny.
“Consequently, and in line with good corporate governance practice, each DSIB is hereby required to: Ensure it obtains regulatory approval for the appointment of a successor Managing Director not later than six months to the expiration of the tenor of the incumbent MD/CEO. Publicly announce the appointment of the successor MD/CEO not later than three months to the planned exit of the incumbent MD/CEO,” the CBN stated in its notice.
The CBN’s directive is based on Section 2.14 of the Corporate Governance Guidelines issued in 2023, which mandates banks to develop solid succession plans for their most senior executives. These guidelines are designed to ensure that banks maintain smooth leadership transitions, limiting the risk of disruption that could negatively impact the financial system.
In an official statement, the apex bank highlighted the crucial role of DSIBs in the economy. “Given their size, complexity, and interconnectedness, disruptions at these institutions could reverberate across Nigeria’s financial markets,” the CBN noted. By introducing this new rule, the bank seeks to mitigate potential risks associated with abrupt leadership changes and ensure that successor CEOs are adequately prepared.
The regulation comes in the wake of several high-profile leadership transitions in Nigeria’s banking sector, such as Access Holdings Plc’s confirmation of Innocent Ike as its Group Managing Director. Ike’s appointment followed the exit of Roosevelt Ogbonna, in line with the CBN’s corporate governance rules.
Analysts and industry leaders have generally welcomed the CBN’s move, noting that it will enhance the management framework of top banks. A senior banking executive emphasized that the rule’s timelines would encourage boards to start grooming successor candidates well before the CEO’s departure.
However, experts have also pointed out potential challenges, particularly in cases of unforeseen exits, such as the sudden death or resignation of a CEO. They suggest that regulators may need to offer flexibility in such instances while still holding banks to high governance standards.
The CBN’s push for structured succession planning aligns with its broader financial reform agenda under the leadership of Governor Olayemi Cardoso. Over the past two years, the CBN has implemented policies to strengthen Nigeria’s financial institutions, including foreign exchange reforms and bank recapitalisation requirements.
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