The Central Bank of Nigeria has revised the tenure of Executive Directors (ED), Deputy Managing Directors (DMD) and Managing Directors (MDs) of banks and bank holding companies to a maximum of 24 years.
This is contained in Section 3 of the new Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria.
The new guideline is to take effect from August 1, 2023.
Five months ago (February 2023), CBN had in a revised guideline, stated that the tenure of ED, DMD, and MD was subject to a maximum of 10 years.
However, in the new guidelines, the cumulative tenure limit of directors (ED, DMD, MD, and NEDs) on the Board of the same bank is now 24 years from the 20 years it was previously.
Section 3 of the guidelines stipulates that the tenure of the MD/CEO of a bank shall be in accordance with the terms of engagement with the bank but subject to a maximum period of twelve (12) years.
The guidelines also provides for the tenure of the Deputy Managing Director (DMD) and Executive Director (ED), stating that the tenure of a DMD/ED of a bank shall not exceed a period of twelve (12) years.
However, where an ED becomes a DMD, a cumulative tenure of twelve (12) years applies and shall not be extended.
This means, if an ED who has served for 5 years is made DMD, they only have 7 years left to serve as DMD.
But where a DMD/ED becomes an MD/CEO of the same bank, his/her previous tenure as DMD/ED is not included in computing his/her tenure as MD/CEO.
It, however, stated that this is subject to a cumulative tenure limit of 24 years which was covered in Section 8 of the guidelines.
Section 8 states that the cumulative tenure limit of directors (ED, DMD, MD, and NEDs) on the Board of the same bank is twenty-four (24) years.
The new guidelines also touch on the Cooling Off period of bank executive directors, stating that upon expiration of a maximum tenure, executive directors must serve out a cooling off period of two years before being eligible for appointment as NED in the same bank subject to applicable tenure limits.
“An Executive (ED, DMD or MD/CEO) who exits from the Board of a bank either upon or prior to the expiration of his/her maximum tenure, shall serve out a cooling period of two (2) years before being eligible for appointment as a NED in the same bank, subject to applicable cumulative tenure limits.”
“Where an Executive (ED, DMD or MD/CEO) of a bank is appointed to the Board of its FHC in any role, a cooling-off period of two years shall apply.”
The guideline also makes provisions for Non-Executive Directors stating that they can serve for a maximum of 12 years comprising three terms of four years each.
NEDS (with the exception of INEDs) of a bank shall serve for a maximum of twelve (12) years comprising three terms of four years.
To qualify as a NED in a bank, the proposed NED shall not be an employee of a financial institution except where the bank is promoted by that financial institution and the proposed NED is representing the interest of that financial institution.
In the case of a commercial bank with a NIB window, at least one NED shall be knowledgeable and/or have experience in the field of Islamic finance or Islamic Commercial Jurisprudence.
Independent non-executive directors also have a maximum of eight years not exceeding two terms of four years each.
