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corporate governance and related words

ADEKUNLE Ademola O (PhD, LLM). Contact:

This paper reviewed the extent of similarities between the corporate governance framework for public companies in Nigeria and the United Kingdom (UK) principle-based framework and investigated how this relates with the challenges faced by corporate bodies and relevant stakeholders in Nigeria. Both of Nigeria 2011 SEC Code and the UK 2016 FRC Code advanced over the years, influenced notably by developments in the corporate world, in each of Nigeria and the UK, and in other places around the world. Also, the UK Code evolved considerably affected by the UK relationship with the EU as reflected in the regulations on auditor independence and rotation of external auditing firms1. There are basic differences between the market in Nigeria and in the UK. For instance, while market ownerships in the UK are mainly of diffused ownership between the widely-dispersed public shareholders and others, the ownership in Nigeria is predominantly by individuals, families, and government2. In the Nigerian perspective, corporate governance often starts and depends on founding families who retain control of the companies at management levels3, this so, regardless of inconclusive findings from studies into the effectiveness of family ownership in corporate governance3.

The tendency for corruptly amassed wealth is believed to be affecting the effectiveness of corporate governance strategy in Nigeria. Despite the differences in the distribution of market ownership between Nigeria and the UK, both countries share similarities in substance of their codes, the reliance on efficient market based governance mechanism to enforce corporate governance, using soft laws, a system of disclosure with the roles of non-executive directors, to attain greater trust between companies and investors, and using investors voice/exit response to disclosures to ensure companies recognise investors’ priorities in relation to company’s direction or challenges. Though both Nigeria and the UK Corporate Governance Code started with the scope targeting public companies, currently there are suggestion that the focus of the UK corporate governance codes should be extended to large private companies as demonstrated by the proposed Wates Principle4. It would be beneficial if the focus of the Nigeria Corporate Governance Code is extended to large private companies because of the potential effects of their failure on the public. The suspended Nigeria FRC 2016 Code 5 may suggest an attempt at this. There are also indications of a possible trend in the Nigeria Corporate Governance Code from the principle-based ‘comply or explain’ to rule-based ‘apply and explain’. However, the realistic nature of a rule-based framework in Nigeria is uncertain due to the burdensome nature of many of the provisions on a significant number of Nigerian companies that qualify as regulated private companies, that ideally should exercise freedom to apply governance codes in an approach compatible for the size, nature and structure of their trade and industry instead of being compelled to apply a “non-flexible” set of corporate governance rules.

It is imperative to evaluate the potential benefit to the Nigeria market of a review of the requirement of NGN200 billion minimum to qualify for listing on Nigeria Stock Exchange. The lower limit should be considered because the current minimum is a barrier denying numerous companies the opportunity to spread ownership risk to numerous shareholders, leaving market control with overtly powerful few6

Further, considering the challenges posed by corruption, inside dealing in Nigeria market is an important area to evaluate. The penalties to inside dealing in Nigeria (Section 115 Investment and Security Act) appear lenient when compared to what obtains in other countries7,8.



1European Commission. Study on the Feasibility of Alternatives to Credit Ratings Final Report. 2015.  
2 Anthonia Ugowe. Monitoring Good Corporate Governance in Developing Countries: Evidence from Nigeria. NnamdiAzikiwe University Journal of International Law and Jurisprudence. 125 (2016).  
3Igor Filatotchev, Gregory Jackson. & Chizu Nakajima. Corporate governance and national institutions: A review and emerging research agenda. Asia Pacific Journal of Management, 30(4), pp. 965-986.
4Financial Reporting Council. Wates Corporate Governance Principles for Large Private Companies. June 2018.
5Financial Reporting Council of Nigeria. National Code of Corporate Governance 2016.
6Ademola Adekunle. Critical review of corporate governance in Nigeria against the United Kingdom principle-based framework. Nottingham Law School. Nottingham Trent University. November 2018.
7Joseph Onele. Insider dealing under nigerian law: any new lessons from other jurisdictions? The gravitas review of business & property law June  2016 Vol. 7 No. 2
8.United States Securities and Exchange Commission Litigation Release No. 19794 / August 7, 2006
15SEC v. Martha Stewart and Peter Bacanovi, 03 Civ. 4070 (RJH) (S.D.N.Y.)
Martha Stewart and Peter Bacanovic Agree to Settle SEC Insider Trading Charges

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