February 27, 2023/CSL Research
The Central Bank of Nigeria (CBN) has in a circular dated 24 February 2023 reviewed the tenure for Executive Management and Non-executive Directors of Deposit Money Banks and Financial Holding Companies. Based on the circular, the tenure for Executive Directors (EDs), Deputy Managing Directors (DMDs) and Managing Director (MDs), shall be in accordance with the terms of their engagement approved by the board of Directors of banks, subject to
a maximum tenure of ten (10) years. While this has been the case in the earlier requirements, some other additional restrictions have been introduced. Specifically, the circular noted that where an Executive who is a DMD becomes the MD/CEO of a bank or any other Deposit Money Banks (DMB) before the end of his/her maximum tenure, the cumulative tenure of such Executive shall not exceed twelve (12) years.
Furthermore, for an Executive (ED) who becomes a DMD of a bank or any other DMB, his/her cumulative tenure as ED and DMD shall not exceed 10 years. Also, Non-Executive Director (NEDs) except for independent Non-Executive Director (INED), shall serve for a maximum period of twelve (12) years in a bank, broken into three terms of four years each. On the other
hand, EDs, DMDs and MDs who exit from the Board of a bank either upon or prior to the expiration of their maximum tenure, shall serve out a cooling-off period of one year before being eligible for appointment as NED to the board of Directors. Also, NEDs who exit from the Board of a bank either upon or prior to the expiration of their maximum tenure of 12 years (3 terms of 4yeras each), shall serve out a cooling-off period of one year before being eligible
for appointment to the board of any other DMB. Lastly, the circular noted that the cumulative tenure limit of EDs/DMDs, MDs and NEDs across the banking industry is 20 years.
The circular is not completely clear on how this affects holdcos and there are indications that a new circular will be released this week to address the holdco situation. However, we expect to see some board changes in the banking sector in the coming days line with the directive as some Non-executive directors of the banks have had a cumulative tenure of more than 20 years. Clearly, non-executive Directors with over 20years cumulative tenure in Executive Management are expected to exit the banking system. Hence, we expect some board adjustments in almost all the banks.
We also expect active succession planning exercises to begin as some of the current CEO of DMBs are approaching the end of the new 12-year tenure limit. For instance, the current CEO of Zenith Bank was appointed an ED in 2013 and CEO in 2019, implying about 10years in Executive Management position hence he is expected to exit his position as CEO in another 2years. Similarly, Mr. Roosevelt Ogbonna was appointed as the Bank’s Managing Director/ Chief Executive Officer effective May 2022 after being appointed as an ED in 2013 implying about 10years in Executive Management position hence he is expected to exit his position as CEO in another 2years. These changes may dampen the current enthusiasm in the banking names.
