The Central Bank of Nigeria (CBN) has directed all banks and other financial institutions collectively known as Domestic Systemically Important Banks (DSIBs) to ensure that they obtain regulatory approval for the appointment of successor Managing Directors/Chief Executive Officers (MD/CEOs).
They are to do this no later than six months before the expiration of the tenure of the incumbent chief executive.
The apex bank, in a circular titled FPR/DIRIPUB/CIRI001/007, signed by Dr. Rita I. Sike, Director, Financial Policy and Regulation Department, also mandated that banks publicly announce the appointment of their successor MD/CEO not later than three months before the planned exit of the sitting chief executive.
The new rule, contained in a circular dated September 17, is part of the CBN’s ongoing efforts to strengthen corporate governance and ensure stability within the financial system.
According to the CBN, the directive is in line with Section 2.14 of the Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria, 2023, which requires boards of these institutions to establish and approve succession plans for their MD/CEOs, executive directors, and senior management staff.
The circular explained that the requirement is designed to reduce the risks associated with abrupt leadership changes in critical financial institutions.
“This requirement seeks to minimize disruptions at the top management level, enable top management appointees to prepare adequately for their new roles, and generally mitigate risks associated with abrupt changes in leadership,” the circular stated.
The CBN further noted that given the systemic importance of DSIBs to the country’s financial system, effective succession planning is critical to sustaining confidence and ensuring institutional stability.
“In recognition of the critical role that Domestic Systemically Important Banks (DSIBs) play in sustaining financial system stability, the CBN hereby reiterates the importance of effective succession planning in these institutions,” the circular read.
Some DSIBs, often referred to as “too big to fail” banks, are institutions whose failure could significantly disrupt the financial system and the economy. The apex bank stressed that ensuring smooth leadership transition in such banks was necessary to protect depositors, investors, and the overall financial sector.
Industry analysts say the directive is expected to improve transparency and accountability in leadership succession while also giving regulators sufficient time to assess the suitability of proposed chief executives.
With this directive, the CBN has moved to strengthen governance structures within the nation’s most influential banks, while reinforcing its oversight role in safeguarding financial system stability.