Nigeria, like many other countries, has recognised the importance of good Corporate Governance and Environmental, Social and Governance (ESG) practices in promoting economic stability, sustainability, and growth. In recent years, the country has introduced major reforms aimed at enhancing Corporate Governance standards and integrating ESG considerations into business practices.
Corporate governance reforms and ESG (Environmental, Social, and Governance) integration in Nigeria are rapidly evolving, reflecting a significant shift towards more sustainable, transparent, and accountable business practices.
CORPORATE GOVERNANCE REFORMS IN NIGERIA
Corporate Governance simply means a system of laws, processes and regulations which determine how a company is controlled and directed. Recently, Nigeria has introduced major reforms aimed at strengthening corporate governance frameworks across industries. Key legislative and regulatory developments include:
- The Investment and Securities Act (ISA) 2025, which was signed into law by President Bola Tinubu in March 2025, empowers the Securities and Exchange Commission (SEC) with broader authority, including enforcement of powers such as the power to place directors of public companies on probation, appoint independent directors and impose more stringent administrative sanctions on erring market participants. This Act also extends oversight to digital assets, reflecting the modern investment landscape.1
- The Central Bank of Nigeria (CBN) 2023 governance framework for banks and large financial institutions mandates stricter board compositions, including a minimum of two (2) - three (3) Independent Non-Executive Directors (INEDs) on boards of Payment Service Banks, Non-Interest Banks, Merchant and Commercial Banks on the basis of their authorisation.2. In addition to disclosing a summary of risk management policies in annual financial statements, publicly quoted banks must now host a summary of such disclosures on their website according to Section 12.7 of the Guideline.
- The Nigerian Code of Corporate Governance (NCCG) 2018, which was launched by the Financial Reporting Council of Nigeria (FRC) to harmonise Corporate Governance principles across sectors. The NCCG has set a clear benchmark for good governance practices in Nigeria. The NCCG Code generally applies to all public companies and to private companies that are holding companies of public companies.3
ESG INTEGRATION IN NIGERIAN CORPORATE GOVERNANCE
Environmental, Social and Governance (ESG) refers to a model used to measure an organisation's environmental and social impact. The integration of ESG principles into Corporate Governance in Nigeria involves incorporating Environmental, Social, and Governance factors into a company's decision-making process. This approach ensures that companies prioritise sustainability, ethical practices, and transparency, ultimately benefitting both the organisation and its stakeholders. Examples of legislative and regulatory developments incorporating ESG include:
- The Federal Competition and Consumer Protection Act, 2018 (FCCPA) incorporates ESG factors such as protecting and promoting the interests and welfare of consumers, and contributing to the sustainable development of the Nigerian economy4. The FCCPA also contains provisions that protect the rights of a consumer; such rights include the right to be given information in plain and understandable language5, the right to disclosure of prices of goods and services6, the right to fair dealings7 and the right to safe, good quality goods8.
- Nigeria Code of Corporate Governance (NCCG) and Nigeria Stock Exchange (NSE) Sustainability Disclosure Guidelines, 2019, incorporates ESG factors by providing ESG disclosures, the considerations recommended under the NCCG include the inclusion of a corporate governance report (with clear information on governance issues as well as environmental and social risks and opportunities)9 and a statement by the board on the company's ESG activities in the annual report of the company10.
- The Petroleum Industry Act 2021 incorporates ESG considerations such as host community development11 which promotes sustainable and peaceful co-existence between licensees or lessees and the host community reflecting the importance of environmental and social governance in Nigeria's key oil sector.
BENEFITS OF CORPORATE GOVERNANCE REFORMS AND ESG INTEGRATION
The benefits of corporate governance reforms and ESG integration in Nigeria include:
- Improved transparency and accountability: ESG integration into Corporate Governance promotes transparency and accountability, helping companies to demonstrate their commitment to sustainability and responsible business practices.
- Enhanced risk management: By integrating ESG factors into Corporate Governance, companies can better manage risks and opportunities, reducing the likelihood of negative impacts on their business.
- Increased stakeholder trust and confidence: ESG integration into Corporate Governance helps to build trust and credibility with stakeholders through meeting the demands of stakeholders.
- Long-term sustainability and growth: By prioritising ESG considerations in corporate governance, businesses can bolster their resilience and sustainability by effectively managing these risks, thus minimising potential adverse impacts on their long-term success.
CHALLENGES OF CORPORATE GOVERNANCE REFORMS AND ESG INTEGRATION IN NIGERIA
The challenges of corporate governance reforms and ESG integration in Nigeria include:
- Limited awareness and understanding of ESG practices: Most organisations do not understand the whole concept of ESG practices, which is as a result of poor training or no training on ESG practices.
- Inadequate regulatory enforcement: Enforcement of corporate governance reforms has been poor due to lack of a proper system that can track the progress of the compliance of ESG in organisations.
- Limited capacity and resources for implementation: Implementing Corporate Governance Reforms and ESG, could hit a dead end where the organisation is limited with resources and capacity for implementation.
In resolving the challenges of implementing corporate governance reforms and ESG in Nigeria, organisations should facilitate frequent ESG training for members of staff to create awareness and build capacity; and also create assessment criteria for effectively tracking the ESG progress of the organisation against the relevant ESG model.
CONCLUSION
Nigeria's corporate governance reforms and ESG integration represent a transformative journey towards more ethical, transparent, and sustainable business practices. Embracing these reforms and ESG principles is becoming a competitive advantage, positioning Nigerian businesses for success in a rapidly changing global economy. As Nigeria continues to evolve its corporate governance and ESG landscape, companies, regulators, and stakeholders need to work together to promote a culture of transparency, accountability, and sustainability. This dynamic integration requires continuous adaptation, proactive governance strategies, and a commitment to sustainability as core to corporate purpose and operations.
Footnotes
1. Section 3(3)(b) of the Investment and Securities Act 2025.
2. Section 1.5 of the Central Bank of Nigeria 2023 Corporate Governance Guidelines
3. Corporate Governance in Nigeria
4. Section 1 of the Federal Competition and Consumer Act 2018
5. Section 114 of the Federal Competition and Consumer Act 2018
6. Section 115 of the Federal Competition and Consumer Act 2018
7. Section 124 of the Federal Competition and Consumer Act 2018
8. Section 131 of the Federal Competition and Consumer Act 2018
9. Paragraph 28.1 of the NCCG
10. Paragraph 28.8 of the NCCG
11. Section 234 of the Petroleum Industry Act, 2021
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