The Central Bank of Nigeria (“CBN”) on 24 February 2023 issued a circular1 announcing changes to the tenure of executive and non-executive directors in the Nigerian banking industry.

The circular titled “Review of Tenure of Executive Management and Non-Executive Directors of Deposit Money Banks in Nigeria” (the “Circular” or the “2023 Circular”), is a successor to the Guidelines for Tenure of Managing Directors of Deposit Money Banks and Related Matters issued by the CBN in 2010 (the “2010 Tenure Guidelines”) and the Code of Corporate Governance for Banks and Discount Houses issued by the CBN in 2014 (the “2014
Corporate Governance Code”).

In this client alert, we summarise the provisions of the Circular, highlight the key changes that it has introduced, and analyse its implications for the Nigerian banking industry.


As might be expected, the 2023 Circular has led to animated discussions in the market with some supporting, but mainly dissenting voices. Even though the Circular is stated as “part of measures aimed at strengthening governance practices in the banking industry”, it is not entirely clear what particular governance lapses it is intended to address.

There has been some speculation that one possible motivation of the Circular is to plug the so-called ‘HoldCo structure’ loophole through which term-limited bank CEOs and founders return to service by being appointed to the board of directors at the holding company level of their former banks. If indeed the HoldCo structure was a target of the Circular, it appears to have only addressed it indirectly.

This is so because, although the 2023 Circular in its introductory paragraph speaks of the CBN having “revised the regulatory requirements for the tenure of Executive Management and Non-executive Directors of Deposit Money Banks and Financial Holding Companies in the Code of Corporate Governance for Banks and Discount Houses”, the substantive provisions of the circular strangely appear to be solely focused on directors of deposit money banks.

In addition to this ostensibly redundant reference to “Financial Holding Companies”, the Circular also appears in two places to use the expression “a bank or any other deposit money bank” in a way that could give a false impression that a “bank” and a “deposit money bank” mean two different things. Whilst the 2010 Guidelines set a maximum tenure limit of 10 years for bank CEOs, the 2023 Circular has now extended that restriction to all executive directors including DMDs.

Unless it is an unintended omission or drafting error, it is not clear why the DMD Exception that increases the cumulative tenure limit of DMDs that becomes CEOs does not extend to other Executive Directors that become CEOs without being DMD.

The tenure limit of 12 years comprising three terms of four years each for NEDs under the 2023 Circular essentially restates the standard under the 2014 Corporate Governance Code, except that the Circular appears to have removed the limit in relation to INEDs. In other words, under the new circular INEDs would no longer be subject to a 12-year tenure limit and may therefore serve as bank directors up to the newly introduced industry tenure limit of 20 years.

Whilst the 2010 Tenure Guidelines required a three-year cooling-off period before bank CEOs that have completed their tenure may be re-appointed as NEDs in their former banks or their affiliates, the 2023 Circular extends the cooling-off requirement to all executive directors (including CEOs, DMDs, and Executive Directors), but only for a one year period.

In other words, because of this extension of the requirement, the standard previously applicable to CEOs has now been reduced from three years to one. The Circular similarly requires a one-year cooling-off before NEDs (including INEDs) that leave office can be eligible for appointment to the board of any other bank.

Unintended Consequences

The introduction for the first time of regulatory tenure limits on executive directors (other than CEOs) is likely to cause a massive purge of experienced executives from the industry.

This measure is significantly out of step with the position in such other markets as South Africa, the United Kingdom, and the United States none of which impose any specific tenure limits on EDs, NEDs, and CEOs in the banking industry.

In Ghana, where there is a 12-year tenure limit on bank CEOs, there is no term limit on EDs, NEDs, or INEDs. Similarly, the new industrywide 20-year service limit would mean that a host of senior bankers serving as NEDs after retiring from executive positions in the industry would soon be forced to leave their non-executive roles.

Indeed, by making this service limit industrywide, the 2023 Circular may well have the unintended consequence of precluding affected persons from service on the boards of CBN-regulated non-bank financial institutions and microlenders.

The Circular has an effective date of 24 February 2023 but is silent on whether the tenure limits that it imposes should be calculated retroactively or prospectively.

This is in contrast to the 2010 Tenure Guidelines which in introducing a ten-year tenure limit on CEOs expressly stated as follows: “All CEOs who would have served for ten years by July 31, 2010, shall cease to function in that capacity and shall hand over to their successors.”

By this omission, the CBN leaves the Circular open to avoidable questions as to whether it either clearly intended or necessarily and distinctly implied an intention to apply retroactively.


Having reviewed the provisions and implications of the 2023 Circular, one may be led to the conclusion that, if governance is the key concern it seeks to address, then perhaps a more appropriate approach would be more thorough supervision of board activities rather than more extensive tenure limits for the leadership of Nigerian banks.

Indeed, the loss of experienced stewardship that is certain to result from the application of these new restrictions may indeed be more costly to the industry than the governance gains that they may produce.

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