The Central Bank of Nigeria (CBN) has introduced a new directive requiring all Domestic Systemically Important Banks (DSIBs) to secure regulatory approval for successor managing directors at least six months before the incumbent CEO’s exit. Additionally, banks must publicly announce the appointment no later than three months before the outgoing CEO’s departure. This policy aims to enhance corporate governance, minimize uncertainty, and maintain confidence in Nigeria’s financial system.
The directive, outlined in a circular signed by Dr. Rita Sike, Director of Financial Policy and Regulation, was published on the CBN’s website on Tuesday. It mandates DSIBs to:
– Obtain CBN approval for a successor Managing Director at least six months before the incumbent’s tenure ends.
– Publicly disclose the successor’s appointment at least three months prior to the incumbent’s exit.
The CBN emphasized that leadership uncertainty in major banks could destabilize the financial sector and the broader economy. The directive aligns with Section 2.14 of the 2023 Corporate Governance Guidelines, which require banks to maintain robust succession plans for senior executives to ensure smooth transitions and mitigate risks from abrupt leadership changes.
DSIBs, often deemed “too big to fail” due to their size and interconnectedness, are critical to Nigeria’s financial stability. A disruption in these institutions could impact depositors, shareholders, and the wider economy. The CBN’s new rules aim to ensure orderly leadership transitions, aligning Nigeria with global best practices where succession planning is a key component of risk management.
The directive follows recent high-profile leadership changes in Nigeria’s banking sector, such as Access Holdings Plc’s appointment of Innocent Ike as Group Managing Director after CBN approval, following Roosevelt Ogbonna’s exit. The 2024 death of former CEO Herbert Wigwe further highlighted the need for structured succession plans.
Banks now face stricter timelines, requiring early succession planning, CBN approval six months prior, and public announcements three months before a CEO’s exit. This leaves little room for last-minute decisions, ensuring clarity for stakeholders and fostering stability amid external challenges like currency volatility and inflation.
Industry experts have largely welcomed the policy, noting it will strengthen talent management. However, some warn that unexpected CEO exits, such as resignations or deaths, may pose challenges, urging regulators to allow flexibility in such cases.
This directive aligns with CBN Governor Olayemi Cardoso’s broader reforms, including foreign exchange policies and bank recapitalization, aimed at building a resilient and competitive banking sector. Succession planning now stands as a key pillar of these efforts, reinforcing high governance standards in Nigeria’s financial institutions.
