Central Bank Orders Banks to Obtain Clearance for MD Replacements 6 Months Early

The Nigerian Central Bank has instructed all domestic systemically important banks to obtain its consent before appointing successor managing directors, at least six months prior to the departure of current directors.

Additionally, the apex bank mandated that news of such hires be released at least three months prior to the departing CEO’s official departure.

The directive was published on the apex bank’s website on Tuesday and was included in a circular that was signed by Rita Sike, Director of Financial Policy and Regulation.

As a result, each DSIB is obligated to follow sound corporate governance principles by: (1) Make certain that regulatory clearance is obtained for the appointment of a replacement managing director (MD/CEO) no later than six months prior to the incumbent MD/CEO’s term ending.

The successor MD/CEO should be publicly announced no later than three months before to the present MD/CEO’s scheduled departure. As stated in the statement, “Please ensure strict compliance.”
The CBN claims that the action is meant to minimize uncertainty in Nigeria’s banking industry and improve corporate governance.

The circular clarified that the obligation is based on Section 2.14 of the 2023 Corporate Governance Guidelines, which mandates that boards of commercial, merchant, non-interest, and payment service banks keep succession plans for their senior executives.

According to the CBN, “this requirement aims to minimize disruptions at the top management level, enable top management appointees to adequately prepare for their new roles, and generally mitigate risks associated with abrupt changes in control.”

According to the bank, domestic systemically important banks are essential to the financial system and, if leadership changes are not handled well, might lead to broader instability.

It further stated that Nigeria would be in compliance with global best practices under the new regulations.