Ola Akinwunmi
In a decisive move to strengthen Nigeria’s banking sector, the Central Bank of Nigeria (CBN) has mandated the immediate resignation of bank directors whose personal or associated loans have been classified as non-performing for over a year. This directive is part of the CBN’s ongoing efforts to enforce stricter corporate governance and reduce the prevalence of insider-related bad debts.
The CBN’s guidelines stipulate that any director with a non-performing loan exceeding a 12-month period must vacate their position and will be prohibited from serving on the boards of any financial institutions under the CBN’s jurisdiction. This measure aims to address conflicts of interest and ensure that bank officials are held accountable for their financial obligations.
This initiative is not unprecedented. In 2009, the CBN dismissed the CEOs and executive directors of five banks due to mismanagement of loans and over-reliance on the central bank. Similarly, in 2010, Cecilia Ibru, former CEO of Oceanic Bank, was convicted of corporate fraud related to non-performing loans, resulting in significant financial restitution and imprisonment. The current directive underscores the CBN’s commitment to promoting financial stability and integrity within Nigeria’s banking system.
By holding directors accountable for their dealings, the CBN aims to foster a culture of responsibility and transparency, ultimately bolstering public confidence in the nation’s financial institutions.
As the CBN continues to implement these reforms, stakeholders within the banking sector are advised to review their governance practices and ensure compliance with the new regulations to avoid potential sanctions.