By Ifeanyi Onuba

The recent attention on non-performing loans and suspended dividends in the banking sector has generated debate on governance and regulatory roles.

Such developments are generally examined within the broader context of financial regulation, corporate governance structures, and prevailing economic conditions.

Rather than attributing outcomes to any single institution, the banking system is governed by a framework of shared responsibilities involving shareholders, boards of directors, management, and regulatory authorities, as provided under applicable laws and codes.

Shareholders and Governance Structure

Under the Companies and Allied Matters Act 2020 (CAMA 2020), shareholders exercise authority through the general meeting. Section 238 provides for the appointment of directors by ordinary resolution, subject to statutory requirements.

This framework establishes that shareholders participate in key governance processes, including board appointments and approvals within the company structure.

The provisions of the Act reflect a governance model in which ownership rights are exercised through formal decision-making processes designed to support accountability and transparency.

Shareholder engagement typically includes reviewing corporate performance, considering financial reports, and participating in resolutions in accordance with statutory provisions.

Directors’ Statutory Responsibilities

CAMA 2020 outlines the duties of directors. Section 305 provides that directors are expected to act in good faith in the interests of the company, while Section 306 sets out expectations regarding care, skill, and diligence. Section 309 addresses disclosure and conflict of interest requirements.

These provisions form part of the legal framework governing director conduct in corporate entities.

The Banks and Other Financial Institutions Act 2020 (BOFIA 2020) also provides regulatory guidelines for banking operations, including provisions relating to lending standards, disclosure requirements, and risk management processes.

These frameworks collectively define the responsibilities of boards and management within regulated financial institutions.

Role of the Central Bank of Nigeria

The Central Bank of Nigeria operates within powers established under BOFIA 2020 and related regulations. These include supervisory and prudential measures aimed at maintaining financial system stability.

Section 33 of BOFIA provides for regulatory actions such as restrictions on dividend payments and other capital distributions where deemed appropriate within supervisory assessments.

Section 34 provides for intervention measures, including removal of directors or officers, subject to statutory conditions and procedural requirements.

These provisions form part of a structured regulatory framework designed to support financial stability through defined supervisory tools.

Corporate Governance Framework

Corporate governance in the banking sector involves multiple stakeholders, including boards of directors, shareholders, auditors, internal control systems, and regulatory bodies.

The Central Bank of Nigeria Code of Corporate Governance for Banks and Discount Houses sets out guidelines for board structures, committee functions, and oversight responsibilities, including audit and risk management functions.

Independent directors are included within governance structures to contribute to board deliberations and oversight processes in line with established codes.

Macroeconomic and Sectoral Considerations

Variations in asset quality and loan performance may be influenced by broader economic conditions, including exchange rate movements, commodity price fluctuations, and general macroeconomic trends.

These conditions form part of the operating environment in which financial institutions conduct lending and risk management activities.

Regulatory frameworks, including BOFIA, recognise the importance of capital adequacy and risk management systems in addressing such exposures.

Conclusion

The banking sector operates within a defined legal and institutional framework that allocates responsibilities among shareholders, boards, management, and regulators.

Each participant functions within established statutory and regulatory provisions designed to support financial stability and governance compliance.

The continued strengthening of governance structures and adherence to regulatory frameworks remains central to maintaining stability in the financial system.

Onuba, a Chartered Accountant, wrote from Abuja