The Managing Director/Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC), Alh. Umaru Ibrahim has charged stakeholders in the banking sector to pay greater attention to sound corporate governance practices to prevent systemic crisis in the sector. Alh. Ibrahim, who gave the charge in Lagos while delivering an address at the 2015 Executive Breakfast Meeting of the Society for Corporate Governance Nigeria, identified the failure of sound corporate governance as one of the factors responsible for the 2009 Nigerian banking crisis.
He recalled that the special examination conducted on the 24 banks in Nigeria by the Central Bank of Nigeria (CBN) and NDIC revealed that 10 of the 24 banks were critically distressed as a result of many factors amongst which was poor corporate governance.
According to him: “The special examination revealed that boards and executive managements in some banks were not equipped to run their institutions as their ineffectiveness manifested in the form overbearing influence of some board members, ineffectiveness of board committees; non-adherence to the CBN code of corporate governance and weak ethical standards amongst others.
The NDIC boss emphasized that the problems of the affected banks informed the comprehensive reform embarked upon by the CBN which emphasised enhancing quality of banks, financial stability and ensuring that the financial sector contributes to the real economy.
Alh. Ibrahim reviewed the various laws governing banking operations in Nigeria i.e the Banks and Other Financial Act 1991, the Companies and Allied Matters Act, the NDIC Act, the CBN Act and the Failed Banks Act and expressed the need for more stringent sanctions to serve as deterrent to irresponsible and greedy behaviours.
He cited the case of the recent move by the regulatory authority in the United Kingdom to enhance supervision and management of banks with emphasis on personal responsibilities of directors. In this regard, both the UK companies Acts 2006 and the recent tough new banking rules are compelling some bank directors to rethink their suitability and competence to remain as bank directors. Some board directors actually resigned.
He noted that in their bid to establish a robust and stable financial system to promote national development, supervisory and regulatory authorities also accorded priority attention to sound corporate governance in their own operations. Some of the initiatives put in place by the Corporation to promote sound corporate governance, according to him, included adoption of a charter and code of corporate governance for its Board, compliance with the code of corporate governance for all regulators under the auspices of the Financial Services Regulation Coordinating Committee, code of conduct for its bank examiners and compliance with provisions of relevant Acts of Federal Government on disclosure and accountability.
The NDIC boss recalled the award of ‘Best Deposit Insurance Organisation of the Year 2014that was conferred on the Corporation by the International Association of Deposit Insurers (IADI) for compliance and international collaboration. The award, according to him, was a clear testimony to the Corporation’s compliance with international best practices in the discharge of its mandate. Similarly, the founder of Heirs Holdings, Chief Tony has equally emphasised on the need of corporate governance in both private and national institution.
Elumelu who was speaking at the Institute of Directors Nigeria, IOD, 4th Biennial Lecture held recently at Victoria Island, Lagos said corporate governance is capable of enhancing the corporate institution, noted, it can also be good for accountability and continuity.
According to him, corporate governance attracts capital and also helps in acquiring capable workers for the continuity of business. Speaking further on the theme : “Building A Global Conglomerate On Corporate Governance Values: Challenges And Benefits In A Developing Economy” , the philanthropist said “corporate governance is not only good for managing relationship with shareholders but it is also good for creating the outcome of a long term company – a company that lives in the long term; a company that succeeds and the success is measured not just in terms of the shareholders of the business and other stakeholders”. Speaking on good corporate governance standards, Elumelu said it helps in setting up, shaping or defining our framework of practices.
On why companies bother to raise good corporate governance standards and practice them, the entrepreneur added “There are various reasons. There’s corporate reputation issue. It helps you to enhance your corporate reputation when governed as an institution. It helps transparency and accountability. It helps long term-continuity and success of business and of course it helps to attract and retain good customers and workers”.