By Dotun Ibiwoye

Central Bank of Nigeria (CBN) has expressed concern over prevalence of ineffective shareholders association in the country saying this  undermines  corporate governance practices  in  the country. Speaking at the 2015 annual conference on corporate governance and 10th anniversary of Society for Corporate Governance Nigeria (SCGN), CBN’s Deputy Governor, Financial System  Surveillance, Dr. Joseph Nnanna  noted that  the problem of passive minority and ineffective shareholders association has been one of the  challenges affecting the success of corporate governance in Nigeria.

He therefore called on shareholders to add value to the society through institution of good corporate governance in companies and financial institutions by serving as a check on incompetent boards and managements. Nnanna, who spoke on the topic: “The impact of Corporate Governance: The Nigerian case”, said the economic trend made it mandatory for CBN to come up with policies to institute best practices in financial institutions to meet up with the economic reality.

According to him, the issue of weak corporate governance started with the collapse of major financial institutions in the country and globally. He noted that the introduction of corporate governance was to bring out best practices in the financial sector “by acting locally, but thinking globally”.

“Corporate governance is the system by which business corporations are directed and controlled. It is about holding the balance between economic and social goals and between individual and communal goals. The aim is to align as nearly as possible to the interests of individuals, corporations and society,” he said.

“It is also part of the CBN Governor’s responsibilities to ensure that adequate corporate governance structures exist within the individual banks to make it impossible for their chief executive officers (CEOs) to run up massive debts, which imperil depositors’ funds.” Nnanna said, CBN has the responsibility for the monetary policy of the Federal Government and regulating the activities of commercial banks and ensuring that they remain within the rules.

He also warned that the apex bank would continue to impose financial and non-financial sanctions on any financial institution, which contravenes its policies and rules. Nnanna noted that   corporate governance is also a process of eliminating the culture of impunity in the way of doing business and enthroning the rule of law in business entities. He affirmed that companies with good corporate governance were more profitable than those with weak corporate governance in the area of assets and equity returns.

The CBN chief noted that Nigeria’s financial system was rated among the best 10 and that the country’s banking system was no longer a channel for money laundering since defaulting banks and their CEOs would be sanctioned.