Compliance in the Financial Sector: A Must for Nigerian Finance Companies
The Central Bank of Nigeria (CBN) has issued the Code of Corporate Governance for Finance Companies in Nigeria 2018 to promote financial stability and transparency. This code is mandatory for all finance companies operating in Nigeria, and non-compliance can result in regulatory sanctions.
Mandatory Requirements
According to the CBN, every Nigerian company, including finance companies, must:
- Constitute a Board of Directors with a minimum of five members and a maximum of nine members
- Have at least half of its directors be non-executive directors
- Appoint at least one independent non-executive director
Specific Requirements for Directors
The code outlines specific requirements for the appointment and tenure of directors, as well as the separation of powers between the board chairman and managing director/chief executive officer.
Board Committees
Every finance company is required to establish certain board committees, including:
- Risk Management Committee
- Audit Committee
- Governance and Nominations Committee
Policies and Procedures
Finance companies must also put in place policies on:
- Succession planning
- Approval thresholds for financial transactions
- Remuneration
- Disclosure of shares held by directors
Annual board appraisal reports must be submitted to the CBN, along with a copy of the annual report to shareholders.
Filing Annual Returns
In a move to ensure compliance, the CBN has made it mandatory for finance companies to file their annual returns with the Corporate Affairs Commission (CAC) after obtaining approval from the apex bank.
Importance of Compliance
Experts agree that the code is designed to promote good corporate governance practices and ensure that finance companies operate in a transparent and accountable manner. With the code now in place, finance companies must ensure that they comply with its requirements to avoid regulatory sanctions.
Conclusion
The Code of Corporate Governance for Finance Companies in Nigeria 2018 is a crucial development that underscores the importance of compliance in the financial sector. Finance companies must prioritize compliance to promote financial stability and transparency, and avoid regulatory sanctions.