CBN has granted an extension of tenure to bank executives, allowing them to serve for a maximum of 24 years
The Central Bank of Nigeria has recently adjusted the maximum duration of service for Executive Directors (ED), Deputy Managing Directors (DMD), and Managing Directors (MDs) of both banks and bank holding companies. The revised tenure now spans up to a total of 24 years.
Section 3 of the new Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria contains the following information. The effective date of the new guideline is August 1, 2023. In a revised guideline issued five months ago (February 2023), the Central Bank of Nigeria (CBN) stated that the maximum tenure for Executive Directors (ED), Deputy Managing Directors (DMD), and Managing Directors (MD) was 10 years. However, the new guidelines now state that the cumulative tenure limit for directors (ED, DMD, MD, and NEDs) serving on the Board of the same bank is 24 years.
This is an increase from the previous limit of 20 years. According to Section 3 of the guidelines, the tenure of a bank’s MD/CEO should comply with the terms agreed upon with the bank, but it is subject to a maximum period of twelve (12) years. The guidelines also specify that the tenure of a DMD/ED should not exceed twelve (12) years. If an ED who has served for 5 years is promoted to DMD, they will have 7 years left to serve in that role. However, if a DMD/ED becomes an MD/CEO of the same bank, their previous tenure as DMD/ED does not count towards their tenure as MD/CEO.
The maximum cumulative tenure limit of 24 years, as mentioned in Section 8 of the guidelines, applies to directors (ED, DMD, MD, and NEDs) serving on the Board of the same bank. The guidelines also address the Cooling Off period for bank executive directors. After completing their maximum tenure, executive directors must wait for a cooling off period of two years before being eligible for appointment as Non-Executive Directors (NED) in the same bank, subject to applicable tenure limits. In addition, if an executive (ED, DMD, or MD/CEO) is appointed to the Board of the bank’s Financial Holding Company (FHC), a cooling-off period of two years applies. The guidelines further state that Non-Executive Directors can serve a maximum of 12 years, comprising three terms of four years each.
To qualify as a NED in a bank, the proposed NED must not be an employee of a financial institution, unless the bank is promoted by that financial institution and the proposed NED is representing its interests. For commercial banks with Non-Interest Banking (NIB) windows, at least one NED should have knowledge and/or experience in the field of Islamic finance or Islamic Commercial Jurisprudence. Independent non-executive directors are limited to a maximum of eight years, not exceeding two terms of four years each.