SEC Nigeria Rings the Governance Bell: No More INED-to-CEO Transmutations & Introduction of Tenure Limits
The Securities and Exchange Commission (SEC) Nigeria has once again demonstrated its stance in fostering transparency, accountability, and ethical governance in Nigeria’s corporate space. In a recent circular published on its website on Thursday 29 June 2025, the Commission raised serious concerns over a growing corporate governance anomaly—the internal rotation of directorship roles, particularly the transmutation of Independent Non-Executive Directors (INEDs) into Executive Directors (EDs), within the same entity or a group of companies.
In view of this, the Commission has introduced tenure limits for directors of public companies and Capital Market Operators (CMOs) classified as significant public interest entities, signalling a broader, long-term agenda to institutionalize independence and dismantle entrenchment in boardrooms.
In this article, we will unpack the implications of these significant regulatory interventions and what they mean for boards, governance committees, and capital market players going forward.
Key Highlights of the SEC’s Directives:
|
S/N |
New Rule |
How It Changed |
|
1 |
Prohibition of INED Transmutation |
· INEDs can no longer be appointed as Executive Directors (including CEO) within the same company or within its group. · This rule applies to Public Companies and significant public interest CMOs. |
|
2 |
Tenure Limits for Directors |
· 10-year cap for Directors in the same company. · 12-year cap for Directors across the same group structure. · Applies to CMOs identified by the SEC as ‘significant public interest entities’ · Also applies to CEOs who do not hold board positions. |
|
3 |
Cooling-Off Period & Restrictions for Former CEOs/EDs |
· A 3-year “cooling-off” period is required before a former CEO/ED may be appointed Chairman of the same company or within its group · Even where eligible, the tenure of such an individual as Chairman is capped at 4 years. · Years already served will be included in computing the maximum tenure. |
Commentary: A Shift Towards True Board Independence
This is arguably one of the boldest and clearest assertions yet by the SEC in the area of board independence, tenure, and succession planning. The regulatory stance is rooted in the very ethos of independent directorships, as echoed in the National Code of Corporate Governance (NCCG 2018) and the SEC Corporate Governance Guidelines (SCGG 2020).
The transmutation of INEDs into EDs within the same group undermines their perceived and actual independence—a fundamental characteristic that allows them to provide detached, objective oversight. The line between oversight and management becomes blurred when a supposedly independent director evolves into an insider.
The SEC rightly notes that such conversions “erode neutrality” and dilute the governance checks built into the board structure. This move eliminates such grey areas, reasserting the INED’s identity as a non-negotiable pillar of independent governance.
Legal and Corporate Governance Implications
1. Legal Basis for the Directive: The SEC exercises its power under Section 355(r)(iv) of the Investments and Securities Act (ISA) 2025, which authorizes it to prescribe corporate governance standards for regulated entities.
2. Impacts on Board Composition and Strategy:
- INED recruitment must now be more deliberate.
- Board Succession Planning will need an overhaul.
- Group-wide Board Strategy Required.
3. No Room for Creative Circumvention
The use of the phrase “within the same company or its Group structure” clearly anticipates potential circumvention schemes.
4. Retroactive Counting of Years
Previous years served count toward the 10 and 12-year caps. This means some directors may be ineligible sooner than anticipated.
Observations & Strategic Considerations
Transparency and Governance Ratings: Compliance with these rules will become an evaluative factor in ESG scoring and investor confidence.
Corporate Memory vs. Governance Integrity: The long-term gain of a refreshed and independent board outweighs the risk of losing institutional knowledge.
Stakeholder Education is Vital: Stakeholders must understand the rationale for regulatory changes.
Urgency in Governance Reviews: Companies must audit current board composition and succession plans to pre-empt non-compliance penalties.
This development follows a similar move by the Central Bank of Nigeria (CBN), which on 24 February 2023 issued a circular revising the term limits for Non-Executive Directors (NEDs), Managing Directors (MDs), Executive Directors (EDs), and Deputy Managing Directors (DMDs) of deposit money banks (DMBs) and financial holding companies.
A key distinction between the two circulars lies in the CBN’s introduction of a one-year cooling-off period. This applies to EDs who exit the board of a DMB before taking up appointments as NEDs, as well as to NEDs who leave the board of a DMB before joining the board of another DMB. Additionally, the CBN circular imposes a cumulative tenure limit of 20 years in the banking industry for individuals serving in any of the specified roles.
Conclusion
With this directive, the SEC has signalled a decisive move to close the gap between form and substance in board independence and tenure. It is no longer sufficient to comply with minimum thresholds on paper—independence must be real, not recycled.
Public companies and capital market players must embrace this opportunity to refresh their boards, renew trust, and reassert accountability in their governance frameworks.
Governance is constantly evolving. The time to act is now.
For further insights or to schedule a governance compliance consultation, kindly contact our Advisory team.
Prof. Segun Vincent Menyelim Chima
segun.vincent@goldwyns-ng.com menyelim.chima@goldwyns-ng.com
