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What is wrong with the Nigerian Code of Corporate Governance 2018? – Joseph Onele

On Tuesday, 15 January 2019, the Vice President of the Federal Republic of Nigeria, Prof. Yemi Osinbajo unveiled Nigerian Code of Corporate Governance 2018 (the “NCCG 2018”). Prof. Yemi Osinbajo SAN, while unveiling the NCCG 2018 in Abuja, was reported to have assured Nigerians that the full implementation would promote corporate success and economic growth, lower cost of capital and help minimize wastage and corruption in the country.

This article, however, is not so much about extolling the seemly ‘innovative’ provisions of the NCCG 2018 but to bring to the fore, some core issues that I believe are worth reflecting on and one of which I am of the considered view, could possibly and if proper care is not taken, make the NCCG 2018, in its entirety, be declared incompetent and/or invalid by a Court of competent jurisdiction upon its challenge, having in mind the history and seemly controversial background that predates the issuance of the NCCG 2018.

The first issue for me is the reference to the enabling powers pursuant to which the NCCG 2018 was enacted and/or the Appropriate Issuing Authority, as alluded to in the body of the NCCG 2018.

Propriety of the Enabling Powers Pursuant to which the NCCG 2018 was Issued: In Search of the Appropriate Issuing Authority

By Section 51(c) of the Financial Reporting Council of Nigeria Act 2011 (“FRC Act”) (which was also referenced in the NCCG 2018), the “Committee on Corporate Governance” is to “issue the code of corporate governance and guidelines, and develop a mechanism for periodic assessment of the code and guidelines. [Please note the emphasis on the word “Committee” and the operative word “Issue“].

Meanwhile, Section 8(g) of the FRC Act saddles the Financial Reporting Council of Nigeria (“Council”) with the responsibility to: “monitor compliance with the reporting requirements specified in the adopted code of corporate governance.”

By the same breath, Section 8(i) of the FRC Act empowers the Council to, inter alia “monitor and promote education, research and training in the fields of …corporate governance. [Kindly note the operative word “monitor” used in reference to the functions of the Council as it relates to the Code of Corporate Governance. Please note further that no where in above stated provisions is the word “issue” used].

Furthermore, while Section 8 of the FRC Act relates to the function of the Council, Section 11 of the FRC Act (which was referenced in the NCCG 2018) relates to objects of the Council, which inter alia, include to: “monitor and promote education, research and training in the fields of accounting, auditing, financial reporting and corporate governance.” [Please note again the use of the word “Monitor”].

The foregoing in mind, one could then understand my grievance when I looked at the introductory part of the NCCG 2018 and discovered the seemly feeble attempt by the FRC to cloth itself with the powers it never possessed in the first instance. Using as it were, the Honourable Minister for Industry, Trade and Investment as a ‘disguise’ for its glaring lack of vires to “Issue” the NCCG 2018, as opposed to allowing the relevant “Committee/Directorate” statutorily established for this sole purpose to achieve its statutory mandate and committing as it were, a ‘daylight statutory robbery’ by robbing the Committee or Directorate of Corporate Governance of its statutory responsibility as rightly provided for the lawmakers. By this singular act of the FRC, the FRC has passed off itself as seemly possessing more intelligence than the lawmakers who in their rightful wisdom and perhaps, to ensure proper checks and balances in the ‘issuance’ and ‘monitoring’ of the Code, deemed it fit to alienate the power to “issue” the Code of Corporate Governance from that of the responsibility to ‘monitor.’

For ease of reference, I have taken the liberty to reproduce and highlight some of the wordings used in the NCCG 2018 itself, which I found quite instructive:

“Sections 11c and 51c of the Financial Reporting Council of Nigeria Act confer upon the Council, the powers to ensure good corporate governance practices in the public and private sectors of the Nigerian economy and to issue the code of corporate governance and guidelines.”

The above is quite incorrect! The Council lacks the power to ISSUE the Code of Corporate Governance!! The FRC Act vests the Power to “ISSUE” the Code of Corporate Governance ONLY in the “Committee/Directorate on Corporate Governance” NOT the Council itself!!!

Interestingly, I authored an article in 2017 titled “The Financial Reporting Council of Nigeria and Her Misguided Regulatory Approach: A Classic Example of How Not to Be a Regulator” where I considered this issue. I recommend in particular, pages 12, 13 and 14 of the article which can be accessed here

The other part of the Introductory Section which relates to “Authority of the Code” of the NCCG 2018 which I found grossly misleading:

The Nigerian Code of Corporate Governance 2018 was approved by the Council pursuant to this authority and commended to the Minister for issuance in accordance with Section 73 of the Act”

The above is very misleading! Section 73 of the FRC Act only relates to the power of the Minister to make regulations. The Code of Corporate Governance does not fall in the same purview as the Regulations contemplated under Section 73 FRC Act has specifically made provision for the way and manner the Code of Corporate Governance is to be made.

Assuming arguendo (for the sake of argument) though without conceding, that the “Committee for Corporate Governance” means the same as the “Directorate of Corporate Governance” alluded to in Section 77 FRC Act, it is respectfully submitted that the Council would still lack the vires to “Issue” the Code of Corporate Governance as the Power to “Issue” the Code was never donated to the Council or even the Minister but to the Committee/Directorate of Corporate Governance. Respectfully, it is submitted that ‘regulations’ provided for under Section 73 FRC are not the same as the “Code of Corporate Governance” specifically provided for in Section 51(c) FRC Act which in clear and unambiguous terms, empowers the “Committee on Corporate Governance” is to “issue the code of corporate governance and guidelines, and develop a mechanism for periodic assessment of the code and guidelines.

In any event and assuming arguendo (without conceding) that the powers donated under Section 73 FRC Act includes the power to “Issue” the Code of Corporate Governance, it is respectfully submitted, on the on the authority of NECO v Tokode (2011) 5 NWLR (Pt. 1239) 45, where the Court of Appeal held that the provision in section 19 of the NECO Act 2002 being a specific provision in the Act, prevails over the general provision, and Olawepo v SEC (2011) LPELR-3598(CA), where the Court of Appeal, Per Nwodo, J.C.A also held inter alia that “…where there is specific provision to cover certain specified circumstances, there will be no need to import another legislation to support that statute,” the provision of Section 51(c) FRC Act, being a specific provision to the extent of specifically providing for the issuance of Code of Corporate Governance by the Committee/Directorate of the Corporate Governance, will supersede the general provision of Section 73 FRC Act.


Matters Arising on Independent Non-Executive Director (INED)

Unlike Issue 1, issue two (2) does not affect the validity or otherwise of the NCCG 2018. It only seeks to make an argument (which could most likely be tagged as academic once the NCCG 2018 is declared incompetent or invalid by a court of competent jurisdiction, upon its challenge).

For starters, Paragraph 7.2.7 of the NCCG 2018 provides:
“ An Independent Non-Executive Director (INED) is a NED who does not render any professional, consultancy or other advisory services to the Company or the group , other than in the capacity of a Director.”

To my mind, the above stated paragraph of the NCCG 2018 has great implications for not only ‘high-ranking’ or ‘senior’ lawyers or professionals who act as (I)NED on boards of corporates – who, more often than not, use such opportunities for business development and furthering their career advancement as well as scouting for possible engagements for their ‘primary constituency.’ I seriously doubt if such persons will take this provision of the NCCG 2018 lightly and allow ‘sleeping dogs lie.’ Without attempting to speak for such person, to say this provision is bad for ‘business’ for such persons, would be attempting to say the obvious.

Hence, while it remains to be seen how the provision of Paragraph 7.2.7 of the NCCG 2018 alluded to above will be implemented, in the event that the NCCG 2018 is not declared invalid or incompetently made, I am minded to respectfully submit, the “Apply and Explain” approach provided for in Paragraph C (Code Philosophy) of the NCCG 2018, which essentially recognises that the practices recommended in the NCCG 2018 could be tailored to meet industry or company needs and requires companies to demonstrate how the specific activities they have undertaken best achieve the outcomes intended by the corporate governance principles specified in the NCCG 2018, can be used both as a sword and shield as will be revealed subsequently.

Riding the waves of “Apply and Explain,” I am minded to argue, that while (I)NEDs (who are professionals or consultants in their own right and ordinarily offer professional/advisory services as matter of course), may not be able to offer such services in their personal/individual professional capacity, the institution they belong to (say for instance, a law firm or consultancy firm/company) could actually provide such services to the such company they are NEDs in, provided that such NED is not a member of the team that provided such services.

I have taken the above position, having given due and proper consideration to the Chinese Wall Strategy for managing conflicts’ checks in relatively big institutions and which has been in used in most top law firms across the globe, where a team is not privy to what the other is doing. However, I am not unmindful of the decision of the House of Lords in PRINCE JEFRI BOLKIAH V KPMG (KPMG Case) where the House of Lords was asked as to the duties of the respondent accountants (KPMG) with respect to managing conflict of interests as well as protecting client’s confidential information and held authoritatively that the duty on KPMG (and by extension, those who provide professional services generally) extends beyond that of refraining from deliberate disclosure (of confidential information) but includes the duty not to put the client at risk, as a fiduciary cannot act at the same time both for and against the same client, and the firm is in no better position.

The facts of the KPMG Case are quite straightforward. KPMG had information confidential to a former client, the appellant (Prince Bolkiah or “the Prince“), which might be relevant to instructions which they then accepted from the Brunei Investment Agency (of which the Prince, a former client of KPMG, had been chairman), to investigate the whereabouts of certain assets suggested to have been used by Prince for his own benefit. In the KPMG Case, KPMG had set up an ad hoc within a single department and two teams – one which had acted for the Prince and the one which was acting for the Agency.

The House of Lord granted an injunction restraining KPMG from acting for the Agency on the basis that the burden was on KPMG to show that there was no risk of the information coming into the possession of those within KPMG acting for the Agency and that notwithstanding the fact that KPMG had tried to erect a Chinese wall, is duty bound to protect the confidence of client and could not later act for an opponent.

Driving the point home and notwithstanding the decision of the House of Lord alluded to in the preceding paragraphs which I believe can be easily distinguished, I am minded to submit that to the extent that an (I)NED (who is a professional or consultant in his or her own right and ordinarily offers professional/advisory services as matter of course), may not be able to offer such services in their personal/individual professional capacity, the institution/organisation such an (I)NED belongs to (be it a law firm or consultancy firm) could actually provide such professional/consultancy services to the such company, provided the NED is not a member of the team is to provide such services, adopting the Chinese Wall, with a view to managing conflicts of interest.

*This publication (represents only the personal views of the writer) and is provided to highlight issues as well as for general information purposes only; it does not constitute legal advice. Whilst reasonable steps were taken to ensure the accuracy of information contained in this publication, the author does not accept any responsibility for any loss or damage that may arise from reliance on information contained in this publication.

For more discussion on the NCCG 2018 or any other interesting (legal) issue of interest, please feel free to reach out to the author via e-mail:

Joseph Onele,


About The Author

Joseph Onele is a Legal Practitioner based in Lagos (Nigeria) with several published articles in peer reviewed Journals (both foreign and local). He is peer reviewer for The Journal of African Law (Cambridge University Press), and the Oxford Journal of International Dispute Settlement. He is also Contributing writer with The Arctic Institute based in Washington DC as well as The Kluwer Arbitration Blog (The Netherlands).

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