Investors reject Financial Reporting Council of Nigeria corporate governance code

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The new National Code of Corporate Governance by the Financial Reporting Council of Nigeria [FRCN] has been ‎rejected by investors in the capital market.

The investors argued that the code by the FRCN will harm investments in the future.

After due considerations of the new regulation, which became effective on October 17th, the investors insisted that the FRCN did not incorporate the inputs made to it in a position paper and the three public hearings before the Code was enacted.

Reacting on the Code at a press conference yesterday, in Lagos, the National Coordinator, Independent Shareholders Association of Nigeria IISAN), Sunny Nwosu, insisted that its introduction should have been more democratic.

He said: “Yes, we were invited to make our input and we presented a position paper, which we submitted to the Council as well as participated in the three public hearings on the Code.

“But what we have now is a unilateral decision, and we will not support any legislation that conflicts with the Companies and Allied Matter Act, CAMA.

“As much as we will not support company managers to be reckless, we will also not support overbearing regulators. We will support any corporate governance that will encourage investors, not one that will pull them down.

“And we say that this FRCN Code, which is made compulsory, will not encourage returns on investment.”

The Financial Reporting Council recently released a set of codes, which it claimed was: “In accordance with Section 50 of the FRCN Act, 2011, which among other things, requires the Directorate of Corporate Governance to develop the principles and practices of Corporate Governance applicable in Nigeria.”

Accordingly, the Council came up with three separate regulations, tagged: the National Code of Corporate Governance, effective 17th October 2016, which stipulated:

The Code of Corporate Governance for the Private Sector is mandatory; The Code of Governance for Not-for-Profit entities is “Comply or Justify non-compliance” and the Code of Governance for the Public Sector will not be applicable immediately until an executive directive is secured from the Federal Government of Nigeria.

This is due to the fact that the enabling laws that set up most government establishments already carry some form of governance structure that will require an umbrella legislation to unify the different provisions of those laws to synchronise with this Code.

But reacting to specific provisions for the respective Code, ISAN insisted it would have a “suffocating effect on entrepreneurial aspirations and initiatives of Nigerians and persons seeking to establish business in the country.”

“Apart from the perceived negative implications of over regulation of Nigeria’s corporate world, the shareholders also maintained that the code contained “noticeable contradictions and conflict with the subsisting CAMA, as amended.”