The Nigerian financial industry has been thrown into a buzz as the Central Bank of Nigeria (CBN) releases new regulatory requirements for the tenure of Executive Management and Non-executive Directors of deposit money banks (DMB) and financial holding companies (HoldCos).
This move has already had a tangible impact on the industry as Dr. Adaora Umeoji, the Deputy Managing Director of Zenith Bank Plc, has retired from the bank following the new tenure limits.
The CBN released a circular to all banks on February 24, 2023, stating the new regulations for the tenure of Executive Directors (EDs), Deputy Managing Directors (DMDs), and Managing Directors (MDs) of banks. According to the circular, the tenure of these executives shall be in accordance with the terms of their engagement approved by the board of directors of banks, subject to a maximum tenure of 10 years. Additionally, where an executive becomes the MD/CEO of a bank or any other DMB before the end of his or her maximum tenure, the cumulative tenure of such executive shall not exceed 12 years.
The new regulation has led to the retirement of Dr. Adaora Umeoji from the board of Zenith Bank Plc, effective February 24, 2023. Zenith Bank disclosed this in a notification to the Nigerian Exchange Limited that was signed by its Company Secretary/General Counsel, Michael Otu. The bank explained that her retirement followed the expiration of her tenure of office as Deputy Managing Director in line with the CBN circular.
The CBN’s regulatory requirement also stipulates that Non-Executive Directors (NEDs), with the exception of Independent Non-executive Directors (INEDs), shall serve for a maximum period of 12 years in a bank broken into three terms of four years each. Additionally, EDs, DMDs, and MDs who exit from the board of a bank either upon or prior to the expiration of his or her maximum tenure shall serve out a cooling off period of one year before being eligible for appointment as a NED to the board of directors.
The CBN’s move is aimed at strengthening governance practices in the banking industry, and the cumulative tenure limits of EDs/DMDs/MDs and NEDs across the banking industry are 20 years. The banking industry will be keen to see how these new regulations play out in practice and how they will impact the industry’s overall governance structure.
