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PUBIC SECTOR O
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GOVERNANCE CODE
2016 C
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 CONTENTS

PREFACE
FOREWORD
PAGE

PART A: PRELIMINARY MATTERS

1. Introduction 5

2. Overview of Corporate Governance 8

3. Public Sector Governance 9

4. The Premise of the Code 12

5. Application of the Code 13

6. Legal and Regulatory Framework 13

For Public Sector Entities

7. The Obligations of the State Acting as Owner 14

Of Public Sector Entities

PART B: THE BOARD OF DIRECTORS

8. Board Governance Mandate 15

9. Role of the Board 17

10. Board Structure and Composition 20

PART C: OFFICERS OF THE BOARD

11. Chairman 21

12. Chief Executive Officer 22

13. PSE Secretary 22

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14. Executive Directors 24

15. Non-Executive Directors 24

16. Nominee Directors 27

17. Appointment and Removal of Directors 27

18. Directors’ Induction and Development 28

19. Performance Evaluation 29

20. Remuneration of Directors 30

21. Board Committees 30

22. Audit and Risk Management Committee 31

23. Finance and General Purpose Committee 32

24. Governance Committee 33

25. Meetings 33

26. Board and Government Relationship 34

27. Board and Stakeholder Relationship 36

28. Directors’ Report 36

PART D: FINANCIAL MATTERS

29. Internal Control Framework 37

30. Internal Audit Unit 37

31. External Audit Function 38

PART E: STAKEHOLDER ISSUES

32. Code of Conduct and Ethics 40

33 Whistle-blowing 42

PART F: TRANSPARENCY AND DISCLOSURE

34. Annual Reporting 45

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35. Objective Reporting 45

36. Accuracy of Records 45

37. Effective Communication Policy 45

38. Disclosures 46

38.1. Governance and Board Oversight 46

38.2. Accounting 47

38.3. External Audit 48

38.4. Risk Management and Control 49

38.5. Conflict of Interest and Related Party 50

Transactions

38.6. Sustainability 51

PART G: CORPORATE GOVERNANCE IN

MINISTRIES AND DEPARTMENTS

39. Justification and Rationale 52

40. Derivable Benefits 53

41. Composition and Remit of Ministerial 56

Management Committee

42. Composition and Remit of Public Entities 58

(Oversight) Committee

43. Ministerial Responsibilities and Accountabilities 61

PART H: MISCELLANEOUS MATTERS

44. Commencement 62

45. Transitional Arrangement 62

46. Definitions 62

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 Part A: Preliminary Matters

1. Introduction

1.1. This Code, referred to as the Public Sector Governance

Code in Nigeria 2016, is the outcome of the directive
given by the Honourable Minister of Trade and
Investments to the Steering Committee on Corporate
Governance on 17th January 2013 to extend Corporate
Governance to the Public Sector. This is a commendable
attempt by the Federal Government to correct the
perceived defect in the “bottom-up” strategy used in
introducing the concept of corporate governance into
Nigeria in 2003, which limited the concept to listed and
unlisted public companies and the Anglo-Saxon variant
of board structure

1.2. Terms of Reference

The Terms of Reference given to the Steering Committee

by the Honourable Minister on 17th January 2013 include
the development of a National Code of Corporate
Governance that will enable the Financial Reporting
Council of Nigeria, among other things, to:

(a) Promote the highest standards of corporate

governance;

(b) Promote public awareness about corporate

governance principles and practices;

(c) Act as the national coordinating body

responsible for all matters pertaining to
corporate governance in both private and
public sectors of the Nigerian economy;

(d) Encourage sound systems of internal control

and information systems control to safeguard
stakeholders’ investment and assets of public
interest entities;

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 (e) Promote sound financial reporting and
accountability based on true and fair financial
statements duly audited by competent
independent Auditors; and

(f) Ensure that audit committees of public interest

entities keep under review the scope of audit
and its cost effectiveness, the independence
and objectivity of the auditors.

1.3. The ‘bottom-up’ approach involves the introduction of

corporate governance into an environment as a private
sector initiative without the government necessarily
taking a very active or front-line position in it, but with
great expectation, that the government would later on
appreciate the beneficial effect of corporate
governance and adopt it officially and generally. This
unfortunately never happened but based on hindsight,
the strategy does not appear to have successfully
entrenched the concept and values of corporate
governance in Nigeria.

1.4. A probable explanation for this is that this “bottom-up”

approach, with its defined limitation in terms of
applicability, technically exempted all state owned
entities, parastatals and government commercial
agencies which are now referred to by this code as
Public Sector Entities (PSEs).

1.5. Such exemption encouraged some privatized

government companies to carry their inappropriate
governance practices into the private sector domain,
hence the cursory observation that some companies
that have been privatized do not appear to have fared
significantly better than they were under government
ownership.

1.6. The bottom-up strategy ignored ownership

concentration as a defining Nigerian business
phenomenon and the leverage of political governance,
particularly the unwillingness of successive governments
to embrace corporate governance and its applicability
to State entities and parastatals. Corporate governance
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 in Nigeria has therefore remained an effort limited to the
private sector, hence the perceived tussle between the
entrenched Nigerian societal and business practices on
one hand, and on the other, the profound ethical values
which corporate governance as a concept champions.

1.7. The Nigerian private sector, based on the Steering

Committee’s qualitative data, does not seem to have
fully accepted nor seen any justification for exempting
not only Government Ministries and Departments
(M&Ds), but also the Public Sector Entities (PSEs), from
corporate governance practices. This probably explains
the perceived lukewarm compliance and conformance
evidenced by both published and unpublished
egregious violations. Public sector exemption has
therefore constituted not only a moral handicap but also
a very significant challenge to the orderly development
and acceptability of corporate governance in Nigeria.

1.8. This Code extends corporate governance to public

sector entities as well as Government Ministries and
Departments thus reverting to a ‘top-down’ strategy
which probably the nation should have used ab initio.
This ‘top-down’ strategy is based on the corporate
governance mantra “tone at the top”, meaning
corporate governance and its key underlying values
ought to start from the very top, that is from the
government, its agencies and the myriad of state-owned
entities. This is in complete consonance with the water
phenomenon, corroborated by science, that water
unaided cannot climb, but it can permeate or move
downwards unaided, when poured freely. It is this
downward free movement of corporate governance
practices and values from public sector to the private
sector that this new corporate governance “top-down”
strategy is designed to achieve. This will further
strengthen the ability of citizens to evaluate the role of
government, and in the process transform dramatically
the way government relates with and does business
through its agencies.

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2. Overview of Corporate Governance

2.1. The positive and negative consequences of the

separation of ownership and control in the modern
corporation have rendered the concept of corporate
governance very critical. This is due to the implications of
these consequences for the efficient control of the assets
of such corporations in the interests of shareholders and
other stakeholders. There are many literature definitions
of corporate governance. The commonest being the
one given by Lord Cadbury as ‘the system by which
companies are directed and controlled’. Many scholars
have however criticized this concise definition as being
a very narrow agency perception of corporate
governance, preferring the OECD definition instead.

2.2. The OECD defines corporate governance as “a set of

relationships between a company’s management, its
board, its shareholders and other stakeholders; it
provides the structure through which the objectives of
the company are set, and the means of attaining those
objectives and monitoring performance are
determined.”

2.3. Our Steering Committee after a very extensive literature

review aligned more with the OECD definition because
of its regard for stakeholderism rather than an absolute
or exclusive focus on shareholderism which appears
inappropriate for the Nigerian concentrated ownership
environment. Our Committee therefore adopted the
broader definition of corporate governance that
embraces ‘the rights and responsibilities among all
parties who have a stake in the firm, inclusive of the
environment in which the firm operates and the relevant
government’. This corporate governance definition is in
absolute consonance with our remit for both private and
public sector corporate governance codes.

2.4. Governance literature asserts that boards of directors

are responsible for the governance of their companies.
The owners’ role in governance is to appoint the
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 directors and the external auditors, and thereafter satisfy
themselves that an appropriate governance structure is
in place. The responsibilities of the board include setting
the company’s strategic aims, based on the vision of its
owners, providing the leadership to put them into effect,
supervising the management of the business and
reporting to the owners on their stewardship. The board’s
actions are therefore purely related to governance
directed towards the enhancement of shareholder
value, but in the case of the public sector, public value.

2.5. The relevance of this scenario to the Nigerian public

sector entities is the subject of the next paragraph. Some
countries refer to this variant of corporate governance
as ‘Government Governance’ which emphasizes the
complex situation in which the government acts as the
“owner” of PSEs - but in reality merely an Agent of the
State - on the basis of the electoral mandate given to it
by the citizens. The government at the same time also
acts as the Manager operating through boards made
up of civil and public servants and political nominees
who together constitute the majority on most of Nigerian
Public Boards that are again supervised by non-
independent public servant regulators. This is the
theoretical dilemma of corporate governance
applicability to the Nigerian Public Sector.

3. Public Sector Governance in Nigeria

3.1. The purpose of public sector governance is to ensure

that a Public Sector Entity – by whatever name called –
fulfils its overall mandate, achieves its intended
outcomes for citizens and service users, and operates in
a very effective, efficient, transparent and ethical
manner. Every public organization has its own specific
purpose and is usually set out in its enabling or creative
instrument and the organization is expected, like any
corporate body, to be fully accountable to its ultimate
owners, in the case of the public sector, the citizens, who
are represented by elected legislatures. The citizens’
oversight is exercised in Nigeria by the National and
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 State Assemblies relying significantly on the corporate
governance internal and external mechanisms in the
PSEs which unfortunately do not appear to be very
effective because of inappropriate board size,
composition and nomination processes.

3.2. The State, acting as an owner, is represented by the

Government whose relationship with PSEs should be
comparable to the relationship between a holding
company and its subsidiaries in the private sector
corporate governance. The discernible features of this
government relationship ought to include:

(a) A very strong interest in the compliance,

conformance and performance obligations of PSEs.

(b) Transparent reporting and accountability

arrangements that enable adequate oversight by
the Government.

(c) Arrangements for quick remedial action by the

Government where PSEs’ strategic direction deviates
from that laid down in the PSEs’ enabling instrument
or that preferred by the Government.

(d) The exercise of strategic control over PSEs in a

manner consistent with Government accountability
for stewardship to the National or State Assembly.

(e) The setting by Government of very clear

documented objectives and communication
channels that would avoid anomalous situations
where an informal position taken by a public servant
amounts virtually to an undocumented directive
emanating from the Supervising Authority.

(f) The identification by Government of PSEs’ social

service obligations, and any other matters over
which government maintains ‘reserve powers’, and
over which the Boards of PSEs need to consult with
Government.

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3.3. The Supervisory Authority of PSEs is usually the Ministry
whose political mandate encompasses the service or
product provided by the PSEs. The Supervisory Ministry is
invariably mentioned in the law establishing the PSE
together with details of the board or governing structure.
The effectiveness of a Board in corporate governance
depends very much not only on the calibre and
composition of its membership but also on the degree of
its operational independence. The pervading influence
of Ministers and the preponderance of Government
officials on PSE Boards tended to erode completely the
autonomy of these Boards in a manner suggestive of
their being merely Ministerial Departments.

3.4. It is on record that the Federal Government had made

very clear policy guidelines concerning the expected
relationship between a Minister and the PSEs supervised
by his Ministry. Such policy has not been consistently
implemented and in some cases ignored. Now that the
Federal Government has decided that Corporate
Governance should be entrenched in the public sector,
government has a duty to insist on strict compliance with
not only its policy directives in this regard, but also with
the spirit of good public sector governance. There is
therefore a very critical and urgent need for the
Government to revisit and restructure this ministerial and
supervisory relationship and leave an “adequate
administrative gap” for the sustenance of board
independence that should be predicated on external
independent board oversight (that is professional citizens
acting as independent non-executive directors) rather
than insider board dominance (resulting from the
preponderance of civil servants and public servants on
boards).

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4. The Premise of the Code

The Steering Committee obtained significant inspiration

from the work already undertaken in various jurisdictions,
particularly the OECD Guidelines on Corporate
Governance of State-Owned Entities 2005, the Good
Governance Standard for Public Services 2004 of the
United Kingdom and Corporate Governance in Central
Government 2011, all of which materially related to the
Committee’s remit. These commendable approaches
guided the work of the Committee appreciably by
placing appropriate emphasis on the following:
adequacy and effectiveness of legal and regulatory
frameworks for public sector entities; the State acting as
owner (with public servants dominantly acting as
managers and regulators); equitable treatment of
owners (shareholders and citizens); relationship with
stakeholders, the need for transparency and adequate
disclosure; and the role and function of the Board. The
Committee also considered good governance as a
means of focusing on organisational purpose and
outcomes for citizens and service users; definition of
functions and roles; promotion of values through ethical
behaviour; taking informed and transparent decisions;
developing the capacity and capability of the
governing body for effectiveness, and engaging
stakeholders to ensure proper accountability for
stewardship.

4.2. This Nigerian public sector code therefore emanates

from these various perspectives. The purpose is to
entrench corporate governance across all sectors of the
Nigerian economy, particularly Public Sector Entities, so
as to engender healthier, transparent and very
competitive entities.

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5. Application of the Code

5.1 This Code shall be applicable to the following:

(a) All Ministries, Departments and Agencies of

government;
(b) All State-Owned Entities;

(c) All parastatals; and

(d) All government commercial agencies.

5.2 All the entities mentioned in section 5.1 above shall

be collectively referred to in this Code as “Public
Sector Entities” and abbreviated as “PSEs”.

6. Legal and Regulatory Framework for Public Sector

Entities

6.1. There should be a clear separation between the

State’s ownership function and other State
management and regulatory involvement that
may influence the conditions for PSEs, particularly
with regard to market regulation and discipline.

6.1 Government should simplify and streamline the

operational practices and the legal form under
which PSEs operate. Their legal form should allow
creditors to press their claims and to initiate
insolvency procedures so as to avoid systemic
threats and failures.

6.2 Any obligations and responsibilities that a PSE is

required to undertake in terms of public services
beyond the generally accepted norm should be
clearly mandated by laws or regulations. Such
obligations and responsibilities should also be
disclosed to the general public and related costs
and benefits should be covered in a transparent
manner.

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 6.3 PSEs should not be exempt from the application of
general laws and regulations. Stakeholders,
including competitors, should have access to
efficient redress and an even-handed ruling when
they consider that their rights have been violated.
Government should examine the enabling
instruments of all PSEs in order to establish a level
playing field.

6.4 The legal and regulatory framework should allow

sufficient flexibility for adjustments in the capital
structure of PSEs when this is necessary for
achieving the organisation’s objectives.

6.5 PSEs, where empowered, should be made to face

competitive conditions regarding access to finance.
Their financial relationship with state-owned banks,
state-owned financial institutions and other state-
owned companies should be based on purely
commercial grounds so as to ensure operational
competitiveness across all sectors.

7 The Obligations of the State Acting as Owner of

Public Sector Entities (PSEs)

7.1 The government should develop and issue a very

clear ownership policy that defines the overall
objectives of state ownership, the state’s role in the
corporate governance and how it intends to
implement its ownership policy, otherwise referred to
as Government Governance.

7.2 The government should not be involved in the day-

to-day management of PSEs and should allow them
full operational autonomy to achieve their
objectives which should be clearly defined by
government acting as owner.

7.3 The State should let PSEs boards discharge their

responsibilities, exercise their authorities and assert
their independence.

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7.4 The exercise of ownership rights should be clearly
identified within the State administration. This should
be facilitated by setting up Ministerial Supervisory
and Monitoring strategies exemplified by Ministerial
Management Committees, and the strengthening of
individual boards in terms of independence, size,
composition and calibre.

7.5 PSE boards and Supervisory and Monitoring

Authorities should all be held collectively and
individually accountable to representative bodies
such as National or State Assembly and have clearly
defined relationships with relevant public bodies,
including the offices of the Federal or State Auditor
General.

7.6 The State, as an active owner, should exercise its

ownership rights according to the legal structure of
each PSE. The State should appoint competent
boards of directors to implement policies and
achieve the stated objectives of the PSEs.

Part B: The Board of Directors

8 Board Governance Mandate

8.1 The main purpose of the Board of a PSE is to provide

conceptual, strategic and ethical leadership to the
PSE and ensure that the PSE fulfils its overall purpose
and achieves its intended outcomes for citizens and
service users within the framework of sustainable
public trust.

8.2 The Government acting as owner on behalf of the

State shall set out with vivid clarity the role and
responsibilities of the board as a whole and of
individual directors. The Government should
specifically consider areas of potential conflict of
interest between the Government’s regulatory
responsibilities as government on the one hand, and
its ownership responsibilities on the other. The
mandate should include any requirements to meet
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 explicitly any stated Government policies and socio-
economic objectives.

8.3 The board should ensure that it has a clear

understanding of its mandate and the implications
of its implementation. In case of doubt, the board
should seek clarity from the Government. If
confusion arises out of the implications of
implementation, which cannot be objectively
resolved internally, then the board should consider
seeking relevant external professional advice with a
view to making further representations to
government.

8.4 The board should execute its mandate in such a

manner as to ensure transparent increase in public
value as well as the maximization of socio-political
benefits in terms of the broader principles and
policies of government.

8.5 The board of each PSE should ensure that the entity
works towards a financial target and a dividend
policy, where applicable, agreed in advance with
the Government, with the financial target being set
on the basis that each PSE is required to earn
commercial returns, at least sufficient to justify the
long term retention of assets in the business and to
pay the set commercial dividends from those returns.

8.6 In addition to setting a commercial rate of return

target, the Government may set other financial and
non-financial targets for particular PSEs on a case-
by-case basis based on Government's political and
socio-economic agenda.

8.7 PSEs should operate in the industry sector and

provide the goods and/or services as specifically
approved in terms of its mandate. However, the
Government may, at its discretion, impose certain
service quality standards on PSE’s providing goods
and services in a monopolistic market.

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 8.8 The Board's mandate should be reviewed by the
Government annually or more frequently, where
appropriate.

8.9 In performing its duties and responsibilities, the board

should act with diligence, skill, care and loyalty in
the best interests of the PSE, the State and the
general public.

8.10 The State acting as owner through the Government

and the Board should set very clear vision and
mission and relate these to the enabling instrument
of each PSE.

8.11 Government should on an annual basis make

corporate objective statement either reinforcing
already stated policy or revising such policy within its
authority as owner acting on behalf of the State.

8.12 The Government shall set out in the Board

Governance Mandate details of two Reserve
Powers: Government and Board. Government
Reserve powers relate to those matters on which the
Board must relate with and obtain the concurrence
of Government, while Board Reserve powers are
matters over which the Board has exclusive
authority.

9 Role of the Board

9.1 The board of the PSE has absolute responsibility for

the performance of the PSE and is fully accountable
to government for such performance. As a result, the
board should give strategic direction to the PSE, and
in concurrence with the Government, where
applicable, appoint the chief executive officer and
ensure that an effective succession plan for all
directors and key executives is in place and
adhered to.

9.2 The board must retain full and effective control over
the PSE and monitor management closely in
implementing board plans and strategies.

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9.3 The board should ensure that the PSE is fully aware of
and complies with applicable laws, regulations,
government policies and codes of business practice
and communicate with government and relevant
stakeholders openly and promptly with substance
prevailing over form.

9.4 The board should have an agreed procedure for

director’s solicitation of independent professional
advice at the expense of the PSE.

9.5 All board members should have unrestricted access

to accurate, relevant and timely information of the
PSE and act on a fully informed basis, in good faith,
with diligence, skill, and care and in the best interest
of the PSE, whilst taking account of the interests of
the State and other stakeholders, including
employees, creditors, customers, suppliers and local
communities. To this end, the board must monitor
closely the process of disclosure and communication
and exercise objective judgment on the affairs of
the PSE, independent of management. In so doing,
each individual member of the board must keep
confidential all matters of the PSE.

9.6 The board should formulate, monitor and review

corporate strategy, major plans of action, risk policy,
annual budgets and business plans of the PSE and
regularly identify key risk areas and key performance
indicators, based on both financial and non-
financial aspects such as the socio-political
expectations of Government

9.7 Without derogating from its fiduciary duties, the

board should ensure that stakeholders’ performance
objectives are achieved and can be measured in
terms of the performance of the PSE. In addition, the
board should ensure that the PSE prepares annual
budgets against which, inter alia, its performance
can be monitored.

9.8 The board should monitor and manage potential

conflicts of interest of management, board
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 members and the Government. The board as a
whole and each individual director must not accept
any payment of commission, any form of bribery, gift
or profit.

9.9 The board should develop a clear definition of the

levels of materiality or sensitivity in order to
determine the scope of delegation of authority and
ensure that it reserves specific powers and authority
to itself. Delegated authority must be in writing and
evaluated on a regular basis.

9.10 Board members should attend annual general

meetings and ensure that each item of business
included in the notice of annual general meeting is
accompanied by a full explanation of the effects of
any proposed resolutions; the aim being to ensure
that stakeholder value is increased.

9.11 The board should ensure that financial statements

are prepared for each financial year, which presents
a true and fair view of the affairs of the PSE. The
financial statements should be forwarded to the
relevant supervising authority. In addition, they must
maintain adequate accounting records, ensure that
suitable accounting policies, consistently applied
and supported by reasonable and prudent
judgments and estimates, have been used in the
preparation of the financial statements, and they
must also ensure that relevant accounting standards
have been applied.

9.12 The board should appraise the performance of the

chairman on an annual basis. The board should also,
on an annual basis, review and evaluate its required
mix of skills and experience and other qualities in
order to assess the effectiveness of the entire board,
its committees and the contribution of each
individual director during the entire term of office.
The board should ensure that a confidential board
and director appraisal is conducted on an annual
basis and establish an appropriate mechanism for

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 reporting the results of the board assessment to
Government.

9.13 The board should ensure that there are appropriate

and effective induction and continuing education
programmes for new and existing board members.

9.14 The board should always maintain the highest

standard of integrity, responsibility and
accountability and ensure that it conforms to
corporate governance principles while optimising
the performance of the PSE.

9.15 The board should be responsible for Information

Technology governance.

10 Board Structure and Composition

10.1 Boards constitute a fundamental base of corporate

governance in PSEs.

10.2 The board of directors of PSEs should be made up of

a combination of executive directors and non-
executive directors (that is, government institutional
directors, independent non-executive directors and
nominee directors) such that no individual or small
group of individuals can dominate the board’s
decision-taking.

10.3 The number of executive directors on the board of a

PSE should not be less than two of which one should
be the CEO.

10.4 Executive Directors should not be more than one-

third of the entire board of a PSE.

10.5 The number of non-executive directors on the board

of PSEs should not be less than two-thirds of the
entire board.

10.6 The number of independent non-executive directors

on the board of a PSE should not be less than half of
the number of non-executive directors.
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10.7 The positions of the Chairman of the board and the
Chief Executive Officer (CEO) of a PSE shall be
separate such that one person shall not combine
the two positions in a PSE.

Part C: Officers of the Board

11 Chairman

11.1 Government should appoint one of the board

members, who should preferably be an
independent non-executive director as the
chairman of the board. The chairman’s
responsibilities should, be separate from those of the
chief executive officer. Where this proves to be
impracticable, then the government must appoint
an independent non-executive director as a deputy
chairman to ensure that no one individual has
unfettered decision making powers in the PSE.

11.1.1 The chairman is the head of the board and his

responsibilities include:

(a) ensuring that all the board members are

fully involved and informed of any
business issue on which a decision has to
be taken;

(b) ensuring that executive directors play an

effective management role and
participate fully in the operation and
governance of the PSE;

(c) ensuring that the non-executive directors

monitor the business and contribute to
the business decisions of the PSE;

(d) exercising independent judgment,

acting objectively and ensuring that all
relevant matters are placed on the
agenda and prioritized properly;

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 (e) working closely with the PSE Secretary in
ensuring that at all times all the board
members fully understand the nature
and extent of their responsibilities as
directors in order to ensure the effective
governance of the PSE; and

(f) ensuring that the performance of the

chief executive officer is appraised on
an annual or other more frequent basis
as the PSE’s circumstances may
demand, either by the Ministerial
Management Committee or a
Committee appointed by the board for
this purpose depending on PSE
Government Governance Charter.

12 Chief Executive Officer

12.1 Government should appoint the chief executive

officer of a PSE whose role should be separate from
that of the chairman.

12.2 The chief executive officer’s role should focus mainly

on the management of the PSE, ensuring that the
PSE is run efficiently and effectively and in
accordance with the strategic decisions of the
board.

12.3 The chief executive officer is accountable to the

board.

13 PSE Secretary

13.1 Every PSE should have a secretary or a designated

officer who performs such a function.

13.2 The secretary of the PSE should be a person

possessing the relevant qualifications and
competence necessary to effectively discharge the

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 duties of that office. Only persons who meet the
companies and Allied Matters Act (CAMA)
requirements for appointment as secretary of a
public company should be appointed to the office
of a PSE secretary, or as provided in the PSE’s
enabling law.

13.3 The PSE secretary’s role includes:

(a) assisting the chairman to ensure that the

board functions effectively. This entails
providing the entire board and individual
directors with detailed guidance as to the
nature and extent of their duties and
responsibilities and, more importantly, how
such duties and responsibilities should be
properly discharged in the best interests of the
PSE and the State.

(b) facilitating the induction of new directors of

the PSE and, assisting the appropriate
committee of the board in developing
mechanisms for providing continuing
education and training for all board members
in order to improve and maintain the
effectiveness of the entire board;

(c) assisting the chairman and the chief

executive officer in determining the annual
board plan and other strategic issues of an
administrative nature; and

(d) providing a central source of guidance and

advice to the board and within the PSE as a
whole on matters of business ethics and good
governance..

13.4 The PSE secretary’s performance should also be

appraised in the same manner as the directors of
the PSE.

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14 Executive Directors

14.1 Executive directors are those directors who, in

addition to their board duties, also perform
management functions for the PSE in respect of
which functions they are remunerated.

14.2 They are full-time operational directors.

14.3 The employment contracts of executive directors

should be approved by the Government.

14.4 The day-to-day management of the PSE should be

delegated by the board to the executive directors
who should, in turn, ensure that the strategic
decisions of the board are implemented effectively
and timely.

15 Non-Executive Directors

15.1 Non-executive directors do not participate in the

day-to-day management of PSEs, but should attend
all board and relevant committee meetings.

15.2 Non-executive directors rely mainly on the executive

directors and other management for reports, which
are presented to them for board meetings.

15.3 Non-executive directors play very significant roles in

corporate governance and their purpose is to
provide wider perspectives, independent and
objective strategic horizons and a personal sense of
responsibility and accountability. This includes,
without limitation:

(a) being individuals of calibre and credibility with

the necessary competence, skill, expertise
and knowledge who bring their judgment to
bear - independent of management - on
issues of strategy, performance, evaluation,
resources and standards of conduct;

24
 (b) bringing more objective and independent
monitoring and supervision of the
performance of the executive management
in relation to the board decisions;

(c) assisting in resolving conflicts arising out of, for

example, the remuneration of executive
directors and succession;

(d) participating in the operation of various

committees of the board; and

(e) acting as a check and balance against the

executive directors.

15.4 Non-Executive Directors in PSEs are usually made up

of Government Institutional Directors, Independent
Non-Executive Directors and Nominee Directors.
There are however situations where nominee
directors are also executive directors.

15.4.1 Government Institutional Directors

These are directors on the board of PSEs who

are representing specific Ministry or Agencies
on the board of the PSE concerned. They are
usually appointed by the Supervising Ministry
of the PSE and are generally the officers
dealing with the concerned PSE.

15.4.2 Independent Non-Executive Directors

15.4.2.1 An independent non-executive

director is a non-executive director
who:

(i) is not a substantial shareholder of the PSE

(that is, one whose shareholding, directly
or indirectly, does not exceed 0.1% of the
PSE’s paid up capital) or a nominee of a
substantial shareholder of the PSE or
25
 otherwise related to such a substantial
shareholder of the PSE;

(ii) is not a representative of a shareholder

that has the ability to control or
significantly influence Management;

(iii) has not been an employee of the PSE or

group within the last five years;

(iv) does not have close family ties with any

of the PSE’s advisers, directors, senior
employees, consultants or substantial
shareholder;

(v) does not have, or has not had within the

last five years, a material business
relationship with the PSE either directly, or
as a partner, shareholder, director or
senior employee of a body that has, or
has had, such a relationship with the PSE;

(vi) does not render any professional,

consultancy, or other advisory services to
the PSE or the group, within the last five
years.

(vii) does not receive, or has not received

additional remuneration from the PSE
apart from a director’s fee and
allowances, and does not participate in
the PSE’s share option or a performance-
related pay scheme, nor is he a member
of the PSEs pension scheme;

(viii) has not served on the board for more

than nine years from the date of his first
election ; and

(ix) does not hold cross-directorships nor

have significant links with other directors
through involvement in other companies
or bodies.

26
 15.4.2.2 The above mentioned criteria for
establishing the independent status of an
independent non-executive director are
not intended to be exhaustive, but should
be considered as examples of some of
those relationships or circumstances
which may impair, or appear to impair,
an independent non-executive director’s
independent judgment.

16 Nominee Directors

16.1 These are directors who are nominated by key

stakeholders (such as, Government or core investors)
to the boards of PSEs. They may be executive
directors or non-executive directors.

16.2 Nominee directors serve to render the boards of PSEs

more professional. Accordingly, they should be
drawn from the members of the public, technocrats,
management experts and consultants, and
professional managers in industry and trade, and
members of the academia with high degree of
proven ability, integrity, and credibility.

17 Appointment and Removal of Directors

17.1 The performance of a PSE depends on the

capabilities and performance of its board. It is
therefore imperative that when appointing directors,
Government should ensure that the board is properly
constituted. In this regard, the board should, at all
times, comprise of individuals with ability, integrity,
credibility, accountability, competence, relevant
and complementary skills, experience and expertise.
This is aimed at avoiding possible dominance by any
one director or groups of directors and, above all,
ensuring commitment to the success of the PSE.
27
17.2 Each director’s appointment should be in writing
and for a definite term. The Government may,
however, at its discretion remove a director prior to
the completion of his term of office.

17.3 In the event of a PSE not performing satisfactorily,

the Government may initiate prompt remedial
action, including dismissal of the directors of the PSE.
Provided that nothing herein shall be deemed to
warrant a wholesale dissolution of the board of
directors of any PSE by the Government.

17.4 For the avoidance of doubt, wholesale dissolution of

the boards of PSEs before the end of their term of
office is hereby specifically discouraged and/or
disallowed because it denies the boards the stability,
continuity and experience which staggered board
retirements provide.

17.5 Board continuity is fundamental to the success of

PSEs, and this requires that continuous skills
identification process is undertaken by the chairman
of the board and the governance committee.

17.6 A former CEO or executive director of a PSE should

not be subsequently appointed its chairman or non-
executive director until after five years after his exit,
during which period he should not be known nor
seen to have continued to exercise surreptitious
influence or dominance over the PSE board or
executive management. Such continued influence
or dominance may vitiate any disengagement cool-
off period provided by this Code.

18 Directors’ Induction and Development

18.1 The Board should ensure the establishment of

adequate induction and training programmes for
new and existing directors respectively.

18.2 The chairman, assisted by the PSE secretary, should

ensure that induction programmes expose new
28
 directors to the PSE's operational activities, the
industry in which the PSE operates, all relevant issues
prevalent in the environment, and the roles and
responsibilities of the directors of the PSE.

18.3 Continuing education programme for directors

should assist the directors in developing their skills
and capabilities while ensuring that they are up-to-
date on emerging issues within the PSE’s business
and operating environment.

19 Performance Evaluation

19.1 The board should on an annual basis and as the

circumstances of the PSE may determine, review its
size, mix of skills, expertise and experience and other
qualities in order to measure its performance levels in
relation to the requirements of the Government or its
owners. In this regard, the performance of the entire
board, its committees, the chairman, the chief
executive officer and each individual director should
be evaluated.

19.2 The performance evaluation should seek to measure

the extent of achievement by the board as whole
and individual board members, of the set
performance objectives and targets of the PSE,
which include Government objectives, using key
performance indicators developed for this purpose.

19.3 The performance evaluation should be overseen by

the governance committee of the PSE.

19.4 At least once every three years, the performance

evaluation should be conducted by an
independent external consultant, not being the
external auditors of the PSE concerned.

19.5 Results of the performance evaluation should be

communicated and discussed by the board. Results
of individual director’s evaluation should be
discussed with the director separately by the
Chairman. The evaluation should also be utilised in
determining the re-appointment of directors and
29
 instrumental in developing appropriate induction
programme for new directors and training
programmes for existing directors.

20 Remuneration of Directors

20.1 The Board should establish formal and transparent

policies and procedures for the determination and
approval of the remuneration of executive and non-
executive directors.

20.2 In determining remuneration packages, the

governance committee should ensure that:

(a) executive directors including the CEO should

not be involved in the determination of their
remuneration;

(b) the CEO and executive directors should not

receive sitting allowances, directors’ fees or
other benefits paid or extended to non-
executive directors in relation to board and
committee meetings of the PSE in which they
are employed; and

(c) the remuneration of non-executive directors

should comprise directors’ fees, sitting
allowances, travel, hotel and reimbursable
expenses as well as other related benefits.

21 Board Committees

21.1 The board should determine the extent to which its

duties and responsibilities should be undertaken
through committees. It should determine the number
and composition of such committees, ensuring that
each comprises of directors with relevant skills and
competencies and that its members are able to
devote sufficient time to the committee’s work.

30
21.2 The board should delegate certain of its functions to
well-structured committees, but without abdicating
its own responsibilities. The membership of board
committees should be reviewed and reconstituted
at most every three years.

21.3 Every PSE should have at least the following board

committees:

(a) Audit and Risk Management Committee;

(b) Finance and General Purpose Committee;

and

(c) Governance Committee.

21.4 A Charter should be established and approved for

each committee of the board. The board shall spell
out therein the terms of reference of such
committees.

21.5 The chairman of the board should not sit on any

board committee.

21.6 The PSE secretary, or any other officer in the office of

the PSE secretary, shall be the secretary of all board
committees.

21.7 Minutes of meetings of board committees should be

prepared and sent to members of such committees
on a timely basis, and thereafter to members of the
full board also on a timely basis.

21.8 Minutes are a record of what transpired at a

meeting. Minutes should therefore not be written for
meetings not actually held.

22 Audit and Risk Management Committee

22.1 The Audit and Risks Management (ARM) Committee

should comprise of non-executive directors,
including independent non-executive directors, and

31
 should be independent of executive management
of the PSE.

22.2 The chairman of the ARM committee should be an

independent non-executive director. Executive
Management can only attend ARM committee
meeting on special invitation when the committee is
considering purely audit matters as opposed to
other risks.

22.3 The ARM Committee should comprise of individuals

who collectively possess a good understanding of
internal controls, finance and financial reporting. At
least one of the members of the committee must
have sound and current knowledge of accounting
and financial management.

22.4 Members of the ARM Committee should receive

appropriate information; advice and training to
enable it carry out its role effectively.

22.5 The ARM Committee should be responsible for audit,

internal control and risk management of the PSE.

22.6 Ensure that Information Technology assets are

managed effectively.

22.7 Review the PSE’s Information Technology

governance framework at least annually

23 Finance and General Purpose Committee

23.1 The Finance and General Purpose (F&GP)

Committee should comprise of non-executive
directors, including independent non-executive
directors, and the executive director in charge of
finance and administration in the PSE.

23.2 The chairman of the F&GP committee should be an

independent non-executive director.

23.3 The F&GP Committee should be responsible for

strategy and planning, financial management,
32
 monitoring performance, procurement and other
administrative matters.

24 Governance Committee

24.1 The Governance Committee should comprise of

only non-executive directors, a majority of whom
should be independent non-executive director.

24.2 The chairman of the committee should be an

independent non-executive director.

24.3 The Governance Committee should be responsible

for nomination and appointments, succession
planning, remuneration, board evaluation,
governance and human resources.

25 Meetings

25.1 The Board of a PSE and its committees should have

a formal annual calendar and meet at least once
every quarter, subject to a maximum of eight
meetings respectively in a year.

25.2 All the directors should be issued with the formal

annual calendar and receive notice of board or
committee meetings, including the agenda and
other board papers, at least seven days prior to the
date of the meeting.

25.3. The Chairman in consultation with other members

of the board should develop and agree the
Agenda for board meetings.

25.4. Board members should receive relevant, accurate,

and timely information in a form and of a quality
that enables the board to discharge its duties
effectively.

25.5. Every director should endeavour to attend all

board and committee meetings. Attendance

33
 should be an important consideration for re-
nomination or reappointment.

25.6. Where the quorum for a board meeting is not

specified in the enabling instrument establishing the
PSE, a quorum should be set by the board taking
into account the need to have a majority of non-
executive directors in attendance at meetings. In
the case of committee meetings, the quorum for
such meetings shall be set by the board when such
committees are being established.

25.7. Non-executive directors may have separate

meetings, at no cost to the PSE, without the
executive directors in attendance to discuss crucial
matters in the best interest of the PSE, which are of
serious concern to the non-executive directors.

25.8. Accurate minutes of meetings of the Board and its

committees should be maintained by the secretary
of the PSE or the designated officer performing that
function.

25.9. The board should ensure that it receives adequate

and timely feedback on the work of its committees
and is able to consider their decisions formally. A
written summary of each committee’s deliberations
should be provided by the respective chairmen at
the board meeting following the committee
meeting. The minutes of committee proceedings
should be circulated to all board members as soon
as they have been approved by the respective
committees or the board.

25.10. Minutes are a record of what transpired at a

meeting. Minutes should therefore not be written for
meetings not actually held.

26. Board and Government Relationship

26.1. The relationship between the Government and

PSEs' boards should be governed by the board
34
 mandate. The Government should monitor closely
the extent to which the board as a whole and
individual director achieve the objectives and any
specific performance targets set, and when
necessary, effect any remedial action.

26.2. The Government is responsible for the appointment

and removal of directors from the board. The board
is responsible for the PSE and accountable to the
Government. Accordingly, the board and each
individual director should act in the best interests of
the PSE and the Government.

26.3. The board should keep the Government sufficiently

informed on the PSE on a timely and regular basis.
The board should ensure that the Government is
furnished with sufficient and timely information
concerning the date, location and agenda of
general meetings as well as full and timely
information regarding the issues to be decided at
such meetings to enable any Government input, if
necessary.

26.4. The board should, when reporting to the

Government, present a balanced and
understandable assessment of the PSE’s position. This
requires that the quality of information be based on
guidelines of openness and with substance taking
precedence over form, while addressing material
matters of significant interest and concern to the
Government and other stakeholders.

26.5. In view of the complex nature of the relationship

between Government as shareholder and the PSE
boards on the one hand, and the need for an
effective, independent and competent board, on
the other, it is imperative that the Government’s
ability to issue directives regarding the board’s day-
to-day activities should be in writing and subject to
clearly defined limits.

35
27. Board and Stakeholder Relationship

27.1. Government should fully recognise the PSEs’

responsibilities towards stakeholders and request that
they report on their relations with stakeholders.

27.2. PSEs should acknowledge the importance of

stakeholder relations for building sustainable and
financially sound Entities. Stakeholder relations are
particularly important for PSEs as they may be critical
for the fulfilment of entity obligations whenever these
exist.

27.3. Governments and PSEs should recognise and

respect stakeholders’ rights established by law or
through mutual agreements.

27.4. PSEs pursuing important public policy objectives,

should report on stakeholder reaction and
involvement.

27.5. The board of PSEs should be required to develop,

implement and communicate compliance
programmes for internal codes of ethics. These
codes of ethics should be based on acceptable
norms, in conformity with international commitments
and apply to the PSE and its subsidiaries.

28. Directors’ Report

28.1. In addition to its financial statements, every PSE

should prepare a directors’ report which should
contain the following:

(a) an outline of the PSE’s structure, and comparison

with the prior period if any significant changes
have been made;

(b) a review of the financial performance over the

past year;

(c) information related to internal and external

factors influencing PSE performance, stressing
36
 risks and opportunities and strategies to manage
them;

(d) significant events notified to the Government

during the year;

(e) any judicial proceedings involving the entity

during the year, or likely to be filed during the
coming year;

(f) any significant post-balance sheet events that

will have a material effect on the PSE
performance in the coming year;

(g) discussion of relations with stakeholders, with

specific reference to any significant changes;

(h) financial and other effects of directives from the

Government.

(i) description of social service obligations, with an

assessment of their cost and likely impact on the
PSE and beneficiaries.

Part D: Financial Matters

29. Internal Control Framework

29.1. The Board should ensure that an effective internal

control framework is established in the PSE.

29.2. The effectiveness of internal control should be

reviewed and tested regularly. The review should
cover key control activities, including those related
to financial, operational, budgetary, compliance
and risk management.

30. Internal Audit Unit

30.1. Internal audit is an independent, objective

assurance and consulting activity designed to add
value and improve an organisation’s operations. It

37
 helps an organization to accomplish its objectives by
bringing systematic and disciplined approach to
evaluate and improve the effectiveness of risk
management, control and governance processes.

30.2. The Internal Audit Unit should be headed by a

suitably qualified professional who can be registered
by the regulator.

30.3. The system of internal audit should be under the

control and direction of the ARM committee.
Accordingly, the Head of the Internal Audit Unit
should report to the audit and risk management
committee and have unrestricted access to both
the chairman of the PSE and the chairman of the
ARM committee.

30.4. The internal audit unit should have a Charter written

by and coordinated by the board.

30.5. Internal audit should be provided with facilities that

allow it to accomplish its responsibilities fully.

30.6. The internal audit unit should comprise mainly of

employees of the PSE, and should act
independently of the external auditors at all times.
Employees who work in the Internal Audit Unit should
be fit and proper individuals and perform their
internal audit work in accordance with the
standards set by the Institute of Internal Auditors.

30.7. The appointment and termination of the

employment of the Head of the Internal Audit Unit of
a PSE should be a matter for the audit and risk
management committee and the board and
notified to the Public Entities (Oversight) Committee
of the Supervisory Authority.

31.0 External Audit Function

31.1 Auditing is the systematic process of obtaining,

evaluating and reporting evidence on how well

38
 procedures or tested information satisfy previously
established criteria. It is management, not the
external auditors, who prepare the company's
financial statements. The external auditors examine
the underlying accounting assumptions, principles
and procedures management has adopted, with
board approval. To make the comparisons required
by an audit, the auditor must examine not only the
financial statements themselves but also the
records on which they have been based and the
PSE’s system of internal controls, including internal
audits.

31.2 The financial statements of a PSE must be audited

annually by an external auditor appointed by the
board of a PSE from a list of audit firms given to it by
the Auditor General for the Federation.

31.3 The external auditor must observe the highest level

of professional ethics, independence, and
professional scepticism. The Auditor General must
obtain documented confirmation of the Auditor
that his professional independence was unfettered
before, during and after the Audit.

31.4 Consultation between external and internal

auditors should be encouraged to the extent that
periodic meetings should be held to discuss matters
of mutual interest and to understand respective
methods and procedures. This is within the
framework of mutual respect and professional
independence.

31.5 The external auditor of a PSE may not provide

consulting or any other non-audit services to that
PSE that might impair, or appear to impair, auditor
independence.

31.6 An external auditor or audit firm should not audit a

PSE for more than five consecutive years.

39
31.7 The payment of audit fees should not be used by
any PSE board to constrain or impair external
auditor independence.

31.8 The Auditor General for the Federation must ensure

that the audit fees payable to the external auditor
by the PSE is paid by the board of the PSE without
any hindrance after the completion of the audit.

31.9 In order to ensure independence:

a) No retired partner of an audit firm should be

appointed as a director of any PSE that had been,
or still being audited by that firm, until five years
after the disengagement of the firm from such
audit and/or the disengagement of the partner
from the firm.

b) No partner or employee of an audit firm should

be employed by the PSE which the audit firm has
audited until after a period of three years since the
person ceased to be a partner or staff of the audit
firm.

Part E: Stakeholder Issues

32. Code of Conduct and Ethics

32.1 The board of every PSE should develop and adopt

a formal Code of Conduct and Ethics defining the
standards of behaviour to which directors,
management, employees and third parties doing
business with the PSE are required to subscribe.

32.2 The Code of Conduct and Ethics should commit

the board, management and employees of the
PSE to the highest standards of behaviour and
compliance with all relevant legislations and
policies. It must be sufficiently detailed to give a
clear guide on the expected behaviour.

40
32.3 Directors and management should be objective at
all times, put the interest of the PSE above personal
gains and avoid conflict of interest.

32.4 Directors should disclose any real or potential

conflict of interest and be excused, by taking his
leave, from discussions and voting on any matter
in which they may have an interest.

32.5 Disclosure by a director of a real, potential or

perceived conflict of interest, or a decision by the
Board as to whether a conflict of interest exists,
should be recorded in the minutes of that meeting.

32.6 A register containing director-related interests

should be maintained by the PSE secretary.

32.7 Where it may conflict, or appear to conflict, with

the director's role in the PSE, significant interest in
political activity including office holding, elected
positions, public appearances and candidature for
election, undertaken in the last five years, should
be disclosed and included in the register
maintained by the PSE secretary.

32.8 Directors should not offer or accept any payment,

bribe, favour, gift or inducement which might
influence (or appear to influence) their official
action or position.

32.9 All board members and employees of a PSE should

attest to the Code of Conduct and Ethics on an
annual basis to reinforce the expectation to act
with integrity, the highest moral, ethical and
professional standards in the conduct of the
activities of the PSE.

32.10 Directors and management of PSEs should maintain

very high standards of conduct with a commitment
to the International Standards of probity and
accountability. They should be guided by the
general principles of conduct which underpin
public life such as selflessness, integrity, objectivity,
accountability, openness, honesty and leadership.
41
32.11 Nothing in this Code should be deemed to have
precluded the board, management and staff of a
PSE from complying with the provisions of Code of
Conduct for Public Officers contained in the Fifth
Schedule of the Constitution of the Federal
Republic of Nigeria 1999 (as amended).

33. Whistle-blowing

33.1 The objective of whistle-blowing is to encourage

stakeholders to bring unethical conduct and illegal
violations to the attention of an internal and/or
external authority so that action can be taken to
verify the ethical violation, apply appropriate
sanctions and avoid a re-occurrence. This will
minimize an organisation’s exposure to the
damage that can occur when internal or external
mechanisms are abused or circumvented. It will
also demonstrate to stakeholders the criticality of
adherence to codes of conduct and ethics.

33.2 A whistle-blower is any person(s) including the

employee, management, directors, customers,
service providers, creditors and other stakeholder(s)
of an organisation who reports any form of
unethical behaviour or dishonesty to the
appropriate internal authority or external regulators.

33.3 PSEs should have a whistle-blowing policy which

should be known to employees, stakeholders such
as contractors, customers, service providers,
creditors, shareholders, job applicants and the
general public. It is the responsibility of the board to
implement such a policy and to establish a whistle-
blowing mechanism for reporting any illegal or
unethical behaviour, with or without the knowledge
or involvement of the company’s external auditors.

33.4 The whistle-blowing mechanism should be

accorded priority and the board should also

42
 reaffirm continually its support for and commitment
to the PSE’s whistle-blower protection mechanism.

33.5 The whistle-blowing mechanism should include a

dedicated telephone “hot-line”, e-mail address
and other electronic communication methods that
could be used anonymously to report illegal or
unethical practices.

33.6 The head of the internal audit unit should review

reported cases and bring them to the notice of the
ARM Committee.

33.7 The head of the internal audit unit should provide

the ARM Committee with a summary of reported
cases, cases investigated the process of
investigation and the results of the investigations to
enable the ARM Committee notify the Public
Entities (Oversight) Committee of the outcomes.

33.8 A whistle-blower is obliged to disclose any

information connected with the activities of PSEs
which indicate any of the following:

(a) that an offence has been committed;

(b) that a person has failed to comply with any

laws, internal policies and procedures, etc; or

(c) that someone has concealed any matter

falling within (a) or (b) above.

33.9 A disclosure is deemed to have been made in

accordance with this section if the whistle-blower
discloses to the appropriate internal authority of the
PSE or external regulator provided that such
disclosure, even if made anonymously, is:

(a) in respect of matters which he believes to be

true;

(b) reasonable;

(c) made in good faith; and

43
 (d) can be investigated.

33.10PSEs shall treat all disclosures resulting from whistle-

blowing in a confidential manner. The identity of
the whistle-blower, if disclosed, though it need not
be disclosed, shall be kept confidential.

33.11No PSE to which this Code applies shall subject a

whistle-blower to any detriment whatsoever on the
grounds that he has made a disclosure in
accordance with the provisions of this Code.

33.12Where a whistle-blower has been subjected to any

detriment in contravention of the above provision,
he may present a complaint to the regulator. This is
without prejudice to the right of the whistle-blower
to take other appropriate legal actions.

33.13An employee who has suffered any detriment by

reason of disclosure made pursuant to the
provisions of this Code shall be entitled to
compensation and/or reinstatement provided that
in the case of compensation, the employee's
entitlement shall be computed as if he had
attained the maximum age of retirement or had
completed the maximum period of service, in
accordance with his condition of service. For other
stakeholders, the whistle-blower shall be
adequately compensated.

33.14Any PSE which contravenes the provision of this

section of the Code will be sanctioned
appropriately.

33.15For the purpose of this Code, the word “detriment”

includes dismissal, termination, demotion,
retirement, redundancy, undue influence, duress,
withholding of benefits and/or entitlements and
any other act that has a negative impact on the
whistle-blower.

44
 Part F: Transparency and Disclosure

34. Annual Reporting

Every PSE should publish an annual report within the time

frame specified in its enabling instrument or, where there
is no such provision in its enabling instrument, not later
than six months from the end of the financial year
covered by the annual report.

35 Objective Reporting

The report should provide an objective, balanced and

understandable account and assessment of the PSE’s
business and operations, achievements, financial
statements, operating performance and performance
prospects.

36 Accuracy of Records

36.1 The boards of every PSE should ensure that it

maintains complete and accurate financial and
operational records at all times.

36.2. Where it is deemed appropriate, the Regulator

may appoint an accountant or a firm of
accountants to undertake a technical investigation
of the affairs of any PSE whose financial statements
– whether audited or not – the regulator has official
responsibility to approve.

37 Effective Communication Policy

The board of every PSE should commit to openness and

transparency in all of its business operations. Accordingly,
every PSE should develop a standard policy of openness,
and take steps to ensure that the public is aware of its
provisions. PSE's communication to stakeholders should
be balanced, understandable, transparent and timely.

45
38 Disclosures

The annual report should contain disclosures on the

following issues:

38.1 Governance and Board Oversight

(a) A statement on the organisational structure of the

PSE and its key objectives.

(b) Chairman’s statement on the PSE’s performance for

the period under review; information relating to
internal and external factors influencing its
performance, including risks and opportunities;
strategies to manage the identified risks and
opportunities.

(c) Chairman’s categorical Statement in the Annual

Report as to whether the Board’s expectation has
been met, and the prospects for the future.

(d) The roles and responsibilities of the board including

matters which are reserved for the board and those
delegated to management.

(e) Composition of the Board of directors stating

individual names, biographies, directorial
classification, and the tenure of each director at the
date of the annual report.

(f) The names of the directors considered by the board

to be independent non-executive directors who
should also annually declare themselves as such, the
existence of any relationships contrary to the
qualifications of an independent director and why
the board considers such a director to be
independent, notwithstanding the existence of these
relationships.

(g) The number and composition of board committees

including a description of the roles and
responsibilities of the committees.

46
(h) The number of board and board committee
meetings held, attendance at those meetings and
the manner in which the board and its committees
have discharged their duties.

(i) Board appointment process including the reasons for

the removal, resignation or retirement of directors.

(j) Remuneration policy as well as the remuneration of

board members and senior management as may be
required by International Public Sector Accounting
Standards (IPSAS) or International Financial Reporting
Standards (IFRS).

(k) Performance evaluation process for the board as

whole, its committees and each individual director;
as well as confirmation that performance evaluation
for the year has been carried out.

(l) Disclosure of the existence of the Codes of Conduct

and Ethics, for directors and employees, including
policies on whistle blowing, corruption, anti-bribery
and facilitation payments.

(m) Disclosures in the annual report of the number, the

nature and sources (disclosing names wherever
possible but, for example, from ‘distributors’
‘employees’, etc) of reported cases of illegalities,
improprieties or malpractices and how they were
dealt with. Where there is none, this fact should also
be stated.

38.2 Accounting

(a) A statement of the director’s responsibilities in

connection with the preparation of the financial
statements.

(b) Details of accounting policies adopted and reasons

for changes in accounting policies.

47
(c) Where the accounting policies applied do not
conform to standard practice, the external auditor
should express an opinion on whether they agreed
with the departure and the reasons for such
departure.

(d) A statement from the directors that the business is a

going concern, with supporting assumptions or
qualifications where necessary.

(e) Any significant post-balance sheet events that will

have a material effect on the performance in the
coming year.

(f) Significant accounting policies must be disclosed

in the notes to the financial statements.

(g) Disclosures should be in line with IPSAS or IFRS as

applicable.

38.3 External Audit

(a) A statement from ARM committee on how it

monitors the activities and independence of the
external auditor.

(b) Explanation from the audit committee on how,

auditor objectivity and independence are
safeguarded when they perform non-audit services.

(c) Explanations should be provided for each significant

non-audit service, or category of non-audit services,
what the services are, why the ARM committee
concluded that it was in the interests of the PSE to
obtain such services from the external auditor (rather
than another audit firm) and how auditor objectivity
and independence have been safeguarded.

(d) Justification where the Board does not accept the

ARM committee’s recommendation on the
appointment, reappointment or removal of an

48
 external auditor; explaining the recommendation
and the reasons for the Board decision.

(e) Confirmation that both the Auditor General

(Federation or State) and the relevant Public Entities
(Oversight) Committee have been notified of the
board’s rejection of the Audit Committee’s
recommendation, with an explanation of the
alternative proposal adopted.

(f) Disclosures of the aggregate fees billed by the

external auditor.

(g) Disclosure of the aggregate tenure of the external

auditor (years and months) at the end of the
reporting period.

38.4 Risk Management and Control

(a) An acknowledgement by the board that it is

responsible for the PSE’s system of internal financial
control and for reviewing its effectiveness.

(b) A statement on the effectiveness of the PSE’s internal

financial control systems.

(c) In reporting on the effectiveness of internal control,

PSEs should include in the annual report a statement
to the effect that the framework of internal control
they have established is both appropriate to the
nature of the PSE and effective. The statement
should outline the criteria against which the system is
measured as well as the date on which the
conclusion is made.

(d) Assurances that effective internal audit function

exists in the PSE and where there is none, sufficient
reasons must be disclosed in the annual report with
an explanation as to how assurance of effective
internal processes and systems such as risk
management, internal control etc will be obtained.

49
(e) A statement that risk management, control and
compliance system are operating efficiently and
effectively in all respects, and how this was
ascertained.

(f) Disclosures on the PSE’s risk management policies

and practices including any undue, unexpected or
unusual risks it has taken in the pursuit of reward as
well as any material losses and the causes of the
losses.

(g) Disclosures of any current, imminent or envisaged risk

that may threaten the long term sustainability of the
PSE.

(h) Disclosures of material - or immaterial but often

repeated - regulatory penalties, sanctions and fines
for contraventions or non-compliance with statutory
or regulatory obligations that were imposed on the
PSE or any of its directors or officers by any
regulatory authority.

38.5 Conflict of Interest and Related Party Transactions

(a) The Board should ensure that related party

transactions are disclosed in the annual report. The
disclosures should include the nature of the related
party relationships and transactions as well as
information about the transaction’s financial
magnitudes necessary to understand the potential
effect of the relationship on the financial statements.

(b) Related party disclosures should also include details

of director’s interest in contracts either directly or
indirectly with the PSE or its affiliates. The details
should include the name of the director, the nature,
value and other details of the contract and the
director’s interest therein.

(c) No member of executive management (director

level and above) leaving the services of a relevant
regulatory institution, for any reason, should be
50
 appointed as a director or top management staff of
an institution that has been directly supervised or
regulated by the said regulatory institution until after
three years of the disengagement of such executive
or senior management staff from that regulatory
institution.

38.6 Sustainability

(a) Acknowledgement of the PSE’s wider social

responsibility including such matters as
environmental protection, issues related to climate
change, etc.

(b) Disclosures of the PSE’s business principles and codes

of practice and efforts towards implementation of
same.

(c) Description of the PSE’s human resource policies,

internal management structure and workplace
development initiatives.

(d) Description of the PSE’s internal health and safety

policies as well as disclosures of workplace
accidents, fatalities and occupational and safety
incidents against objectives and targets and a
suitable explanation where appropriate.

(e) Disclose the PSEs policies, plans and strategy of

addressing and managing the impact of HIV/AIDS,
malaria and other serious diseases on PSE’s
employees and their families.

(f) Application, in the PSE’s operations, of options with

the greatest benefit or least damage to the
environment, particularly for PSEs operating in
disadvantaged regions or in regions with delicate
ecology in order to minimize environmental impact
of the PSE’s operations.

(g) The nature and extent of employment equity and

gender policies and practices.

51
 (h) Disclosure of the conditions and opportunities
created for physically challenged persons or
disadvantaged individuals.

(i) Disclosure of the PSE’s contribution to the

community.

(j) Disclosure of the PSE’s policies on corruption and

related issues and the extent of compliance with
such policies and the PSE’s Code of Conduct and
Ethics.

Part G: Corporate Governance in Ministries and Departments

39. Justification and Rationale

39.1. The global financial crisis directed special attention to

PSEs as various governments were forced to re-examine
their impact on national budgets and financial sector
stability. This special focus gave prominence to
government governance in which not only the reform
and the re-structuring of PSE boards were seen in many
countries as a top priority, but also Government Ministries
and Departments (M&Ds) that supervise them. Ministries
and Departments are not-for-profit corporations but they
appear to face similar challenges in terms of
governance and management. In corporate
governance, the private sector usually sets best practice
standards. Governments all over the world sought to
improve not only public sector entities performance, but
also that of ministries and departments by emulating
private sector practices with the expectation that by so
doing, both M&Ds and PSEs will achieve similar outcomes
and create impressive public value.

39.2. M&Ds in order to have effective controls over PSEs, must

be business-like. They can only do this if they themselves
conduct their business with the competence, knowledge
and expertise associated with successful leaders in
private business and commerce at home and across the
world.
52
39.3. Good corporate governance is fundamental to any
effective organization; hence it is an acceptable index
of well-governed and managed entities.

39.4. The need to institute corporate governance in the public

sector has become very critical, particularly in countries
with serious corruption challenges, or are in the
midstream of privatization processes: either way,
corporate governance practices may constitute not only
a deterrent to corruption, but also ensure that public
assets are properly accounted for.

39.5. Good public sector governance should be entrenched

in Nigeria by the development of governance systems in
ministries and departments with emphasis on internal
independent oversight that would result in enhanced
quality of public services. This will enable citizens’
appreciation of government ability to discharge its
responsibilities and create commendable public value.

40. Derivable Benefits

40.1. Benefits Derivable by Ministries, Departments and

Agencies

40.1.1. This public sector code seeks to promote corporate

governance practices within Ministries and
Departments and their stewardship over PSEs with
emphasis on external contribution and oversight over
strategy and implementation, the sort provided by
independent non-executive directors in private
governance. It also sets out both the remit and the
composition of a recommended Public Entities
(Oversight) Committee (PEC) to assist the ministry in its
oversight over PSEs in a manner that a Group Board
oversees the affairs of any of its subsidiaries.

40.1.2. The governance focus is on Ministerial Departments

and the leadership role an overarching Ministerial
Management Committee (MMC) should play in the
activities of departments, and also in the activities of
the Public Entities (Oversight) Committee (PEC). This
53
 Code recommends that each ministry supervising any
PSE should establish a Public Entities (oversight)
Committee (PEC).

40.1.3. The idea is to harmonize the role and functions of

these Departments and make them business-like
through drawing on the expertise and experience of
the nation’s business leaders and technocrats who
should serve on these two committees as non-
executive committee members to undertake robust
ministerial engagement over critical government
policies in the same manner non-executive directors
do in the private sector governance.

40.1.4. The critical benefit of a balanced and diversified

Ministerial Management Committee is to have non-
executives from outside Government meeting with
Ministers, Advisers, Senior Civil Servants and Senior
Public Servants in purely advisory capacity with the
objective of giving advice to Ministry and multiplying
the options of government.

40.1.5. Ministries and Departments should be able to tap into

the available expertise of accomplished citizens who
would provide appropriate challenge and quality
support to departments through their part-time
membership of MMC, and in the process enhance the
strategic and operational capacity of the
departments.

40.1.6. This is the critical element in the differences between

private sector and public sector governance – the
ability of the Private Sector to have external robust
input into strategy and policy implementation for the
enhancement of shareholder and stakeholder value.

40.1.7. Policy formulation will still fall within the remit of the
Honourable Ministers based on advice from both the
Political Party and the Legislature. The MMC is merely
to provide advice on strategy, operational
methodology and effectiveness of policy proposals
towards desirable outcomes. The Committee should
also evaluate, as a ministerial support, departmental
54
 performance and challenge the departments on how
well they have achieved their objectives, created
public value, and engendered public trust.

40.1.8. The Ministerial Management Committee (MMC)

would also have the responsibility to monitor and
supervise the activities of its sub-committee, the Public
Entities (Oversight) Committee (PEC), and its
stewardship over reserve powers (not day-to-day
routine matters) on which the PSEs supervised by the
ministry need to consult with government.

40.2. Benefits Derivable by the State

40.2.1. Allowing knowledgeable, capable and qualified

citizens and also competent non-governmental
technocrats to join and assist Ministerial Management
Committee - whose endowments may be limited to
the expertise within it - should engender improved
public value, openness, objectivity and greater public
trust.

40.2.2. The general public would be able to follow the

functioning of government machinery and its focus on
policy making in which improved governance
processes are central. Transparency of these
processes has become globally essential towards
proper accountability, responsibility, integrity,
commitment and leadership.

40.2.3. High standards of corporate governance in M&Ds

and PSEs, whether in the commercial or non-
commercial sectors, are critical to ensuring positive
contributions to the country’s overall economic
growth, efficiency and competitiveness. There are
many initiatives to improve Public governance

55
 towards performance-oriented management,
external supervision and evaluation. These are all
deliverable by a Ministerial Management Committee
(MMC), and its proposed sub-committee, Public
Entities (Oversight) Committee.

41. Composition and Remit of Ministerial Management

Committee (MMC)

41.1 Composition

41.1.1 The MMC should be made up of the Honourable

Minister(s), Permanent Secretary, Senior and
Special Advisers, Departmental Directors and
Heads of Units, Independent non-civil servants, the
equivalent of independent non-executive
directors in private sector corporate governance.

41.1.2. The Chairman of the MMC should be the

Honourable Minister or another Committee
member designated for this purpose by the
Honourable Minister.

41.1.3. The MMC should determine its own size

based on the needs of each Ministry.

41.1.4. Each Ministry should have a lead independent

management committee member (a non-civil
servant) who will meet regularly with other
independent committee members to exchange
views and ensure that the Honourable Minister is
made aware of their concerns regarding the
performance of each department or any person.

41.2. Remit

41.2.1 The MMC should operate according to recognized

global principles of good corporate governance

56
 with the focal remit being performance, delivery,
and strategic leadership.

41.2.2 Members of the MMC should be guided by the

general principles of conduct which underpin
public life such as leadership, selflessness, integrity,
objectivity, accountability, openness and honesty.

41.2.3 The MMC is to advise on the strategic

implementation of policy and ensure decisions are
based on a collective understanding of issues,
allowing outside perspectives to rigorously
challenge Departments on expected outcomes.

41.2.4 The MMC should agree operative budget plans,

including strategic aims and objectives, the
monitoring of performance against plan, and the
setting of Departmental standards and values.

41.2.5 The MMC should ensure the commercial viability of

government projects and programmes, with sound
financial management. It should also ensure the
setting of Departments’ risk appetite, and that
controls are adequate to manage identified and
potential risks.

41.2.6 The MMC has the responsibility to ensure

Departments have the capacity to deliver
expected outcomes.

41.2.7 The MMC should carry out the evaluation of its

members and plan for succession, with Ministerial
concurrence and directives.

41.2.8 The MMC should ensure periodic, clear, consistent,

comparable, genuine performance information
reconcilable with the Departmental Annual Report.

41.2.9 The MMC should ensure, as part of public service

transformation, that M&Ds are made to provide an
Integrated Annual Report (like the Annual Report in

57
 the Private Sector) to cover both expenditure and
service delivery with clear emphasis on verifiable
achievements.

41.2.10 The MMC is to ensure that Departments have high

regard for environmental, social and governance
issues and that these are reflected in the Integrated
Annual Report.

41.2.11 The MMC should establish a sub-committee to be

known as Public Entities (Oversight) Committee
(PEC) with the responsibility for ministerial oversight
of PSEs supervised by the Ministry. This is not for the
purposes of day-to-day administration - which
should be left for the PSE’s management– but for
supervisory matters over which government has
reserve powers.

41.2.12 The MMC should ensure good governance in its

Ministry in a manner that will enable Nigeria to be
perceived as a good investment destination, and a
well-regulated and reliable economy in which to
do business.

41.2.13 The MMC should avoid and not recommend to

government wholesale dissolution of boards of PSEs
except in circumstances where the committee is of
the view that the entire board has not conducted its
affairs with the general principles of good
governance, and it is tainted with incompetence,
fraud and negative public trust.

42. Composition and Remit of Public Entities (Oversight)

Committee (PEC)

42.1 Composition

42.1.1 The Public Entities (Oversight) Committee (PEC)

should have a balance of skills and experience
necessary to fulfil its supervisory responsibilities over
the PSEs supervised by the Ministry. This means that
58
 civil servants conversant with the intricacies of the
policy issues related to the PSEs must be members
of the Committee. The roles and responsibilities of
all committee members should be clearly defined
by the Ministry’s sub-committee operating
framework. This committee should be resident in,
and operative from, the Ministry.

42.1.2. The PEC should comprise:

 The Honourable Minister or Minister of State (as

Chairman)
 The Permanent Secretary (delegated as
Chairman in the absence of any of the Ministers
mentioned above)
 Ministerial Advisers (may be delegated as
chairman by the Minister)
 Departmental Directors/Heads of Units
 Managing Director & Chief Executive Officer of
the PSE concerned
 At least one independent non-executive director
of the PSE concerned
 Any other person(s) from the commercial private
sector, with competence and experience of
organisational complexity appointed on merit by
the Minister.

42.2. Remit

42.2.1 PEC does not decide policy or exercise the

powers of the Minister. The Ministry’s Policy or
reserve powers are matters for the Minister on
advice by officials.

59
42.2.2 Where the Honourable Minister or the Minister
of State is unavoidably absent, the decisions
or recommendations of PEC on any reserved
policy matters (not day-to-day) should be
communicated to the Honourable Minister by
the Permanent Secretary for approval.

42.2.3 It is the responsibility of the Permanent

Secretary to obtain such approval or
disapproval of the Minister within a
reasonable time in a manner that the time
frame of obtaining response would not
defeat, frustrate or negate successful
outcomes at the PSE, thus tantamount to a
dereliction of duty.

42.2.4 It is the responsibility of independent non-

executive directors of the PSE, with no career
overhang, to bring any such dereliction of
duty directly to the notice of the Honourable
Minister or to the Presidency – to whom they
are ultimately responsible – where the
Honourable Minister appears unable to deal
with it.

42.2.5. The Public Entities (Oversight) Committee

should ensure that arrangements are in place
to enable PSE Boards discharge their
responsibilities effectively, including the
establishment of an Oversight Charter that will
modulate the relationship between the
Ministry and the boards of the PSEs supervised
by it.

42.2.6 The Oversight Charter should set out with vivid

clarity:

42.2.6.1 formal procedures for the

appointment of new board
members, tenure and succession

60
 planning for both board members
and senior officials;

42.2.6.2 time-frame for responding to PSE

Board’s requests for clarification and
directions over government reserve
powers

42.2.6.3 procedures for induction on joining

the board and the medium for
regular updates to keep board
members’ skills and knowledge up-
to-date;

42.2.6.4 timely provision of government

information in a form and of a quality
that enables the board to discharge
its duties quickly and effectively; and

42.2.6.5 procedures for formal and rigorous

annual evaluation of the board’s
performance and that of its
committees, and of individual board
members;

43. Ministerial Responsibilities and Accountabilities

Nothing in this Code is intended to disturb or

change the principal responsibilities and
accountabilities of Ministers. Ministers, even though
not accounting officers of their ministries,
nevertheless lead their Ministries and are
responsible for the actions and policies of such
Ministries. The provisions of this Code are therefore
only intended to support and assist Ministers, their
Advisers, Ministries, Departments and Agencies
(MDAs) conduct the affairs of government on
behalf of the citizens.

61
 Part H: Miscellaneous Matters

44. Commencement

44.1. This Code shall come into force as soon as executive

directive is secured from the Federal Government of
Nigeria.

44.2. From the date of commencement of this Code, it shall

supersede any public governance code in force in
Nigeria.

45. Transitional Arrangements

This shall be dealt with as soon as the executive directive

is secured from the Federal Government of Nigeria.

46. Definitions

46.1 In this Code, unless the context otherwise

requires:

46.1.1 “chief executive officer” means an officer of

a company, who has been designated as
such by it;

46.1.2 “close family member” means those persons

who may be expected to influence, or be
influenced by, that person in his dealing with
a company;

46.1.3 “director” means a director appointed to the

board of a PSE or Ministry or Department;

46.1.4 “regulator” means the Financial Reporting

Council of Nigeria, or any other sectoral
regulator officially recognised by the
Financial Reporting Council for the purposes
of this Code.

46.1.5 “related party” means a person or entity that

is related to any company subject to this
Code; and

62
 46.1.6 “substantial shareholder” means a
shareholder whose shareholding, directly or
indirectly, exceeds 0.1% of the company’s
paid up capital.

46.1.7 ”supervising authority” means any

government ministry, establishment or office
that has oversight function over the PSE.

46.2 In this Code:

46.2.1 words importing the masculine gender

include females; and

46.2.2 words in the singular include the plural and

words in the plural include the singular.

46.3 In construing any fraction resulting from any

provisions of this Code:

46.3.1 where the fraction results from the use of

the expression “less than”, the figure should be
rounded-up; that is to say, the fraction should
be rounded off as one; and

46.3.2 where the fraction results from the use of

the expression “more than”, the figure should
be rounded-down; that is to say, the fraction
should be disregarded.

63