Finance

CBN tenure limit: FBN DMD, Shobo first to step down, others to follow

3.2% growth projection not enough for Nigeria –CBN

In line with the latest directive of the Central Bank of Nigeria (CBN) on tenure limits for bank and financial holding companies’ executives, the deputy managing director of First Bank of Nigeria, Gbenga Shobo, has stepped down from the Board of the bank with immediate effect, the first to do so following the directive.

This is as financial analysts take sides on the policy which is expected to oust not less than three chief executives and two chairmen of board.

Shobo who served as the MD designate in the bank during a boardroom crisis in 2021 had been on the board of the bank since 2012 has been an executive director in the bank for 11 years. The circular by the CBN had stipulated that for “an Executive (ED) who becomes a DMD of a bank or any other DMB, his/her cumulative tenure as ED and DMD shall not exceed 10 years.”

Also expected to proceed on immediate retirement is Ms Adaora Remy Umeoji, DMD, Zenith Bank. Ms Umeoji was appointed ED in December 2012. Ladi Balogun, Group CEO, FCMB Group Plc, became CEO, First City Monument Bank Limited from 2007 to 2017 and is expected to relinquish his present position in line with the new CBN guidelines.

The CBN circular dated February 24, 2023 and which became effective stipulates that no bank executive is expected to surpass 20 years across the banking industry from the time of appointment as executive or non-executive director to deputy managing director and managing director.

The circular which comes 13 years after the initial limit of a 10-year tenure for bank MDs also places a limit of 12 years for deputy managing directors, executive directors as well as non-executive directors.

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Consequently, bank and financial holding executives such as MD of Heritage Bank, Ifie Sekibo, MD of Access Corporation, Herbert Wigwe, MD of Guaranty Trust Holding Company, Segun Agbaje, founder and Chairman of Zenith Bank, Jim Ovia as well as Chairman of United Bank for Africa, Tony Elumelu.

Commenting on the policy, head of financial institutions ratings at Agusto&Co, Ayokunle Olubunmi, noted that whilst the policy was a positive development, the apex bank could have given the financial institutions enough time to have ease of transition.

In 2010, the apex bank had issued the first guideline on tenures for bank executives, limiting tenures of chief executives of banks to 10 years, effectively sacking bank MDs whose tenure elapsed the 10 year stipulation giving them up to July 31, 2010 to comply.

Noting that the policy was long overdue, Olubunmi said it would allow for easier implementation of succession as he said the top level of the banking industry is heavy with those who have been in the industry for a long time thus, not giving room for younger talents to grow.

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“I think it is a good idea, it will actually encourage succession planning which is something that is very crucial in the industry. It will endear succession planning and even bring in fresh ideas because any new MD or new executive will have one or two new things to bring forward on how to make the bank move ahead. It is positive and would encourage more corporate governance in the banking industry. Most importantly, it will lead to the grooming of new leaders.

“What we have noticed among some bankers is that it seems the top is crowded and those at the top are not leaving thus some of them don’t see any hope of growing to those executive positions. So the policy is actually good for the industry.

“If within 12 years, you can’t develop people who will take over from you that means you are not serious about succession planning. If after being in an executive position for 12 years, you can’t identify two to four people that can take over from you then you are not serious about succession.

“In the banking industry there are a lot of people that are able and agile. Some that are very bright have had to leave because there was no chance that they can get to executive positions. There is no draught of people in the industry, what we have seen is experienced knowledgeable people leaving the industry to other places because there is a ceiling of where they can get to.”

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However, analysts at Proshare Nigeria believe that the policy “represents a ham-fisted overreach of power and responsibility” by the apex bank, as they maintained that shareholders should be allowed to fix the tenures of bank executives.

“In the case of the banking business, the CBN should set the rules for bank operations, monitor compliance and apply sanctions where necessary. Caps on executive tenure achieve very little to improve governance quality. The CBN’s desire to see upward mobility amongst Nigeria’s banking rank and file is admirable but is not a requirement for good corporate governance.”

Proshare Nigeria analysts also argued against including financial holding companies in the tenure limit saying “Holdcos are not banks but constellations of different financial and technology-related businesses. The different lines of Holdco businesses have separate regulators, meaning that the CBN cannot unilaterally impose tenure limits on their executives.

“The CBN’s new tenure rules may create a blistering  Cobra effect where the desire for upward professional mobility destroys the retention of critical experience, thereby worsening operational effectiveness and efficiency, credit capacity and human capital dexterity in frontline banks.

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