The Securities and Exchange Commission (SEC) has issued a far-reaching policy directive to strengthen corporate governance practices in Nigeria’s capital market. Effective immediately, independent non-executive directors (INEDs) are now barred from transitioning into executive roles, such as the position of Chief Executive Officer (CEO), within the same company or its wider group structure.
In a circular dated June 20, 2025, addressed to public companies and capital market operators, the SEC clarified its stance on the issue of board transitions and director tenure under a directive titled “Transmutation of Independent Non-Executive Directors and Tenure of Directors.”
According to the commission, allowing INEDs to assume executive roles undermines their independence and contradicts both the National Code of Corporate Governance (NCCG) and the SEC Corporate Governance Guidelines (SCGG). The regulatory body expressed concern that such practices compromise the neutrality and objectivity expected from INEDs.
“This practice clearly erodes the neutrality of the transmuting INEDs, compromises their ability going forward to provide objective judgment, and is generally antithetical to the principles which underpin independent directorship,” the SEC stated in the circular.
As a result, public companies and capital market operators with significant public interest must now discontinue the practice of INED-to-executive transitions without exception.
Director Tenure Now Capped at 10 Years in Company, 12 in Group
In addition to addressing INED transmutation, the SEC also imposed strict limits on director tenure. Directors of significant public interest entities are now limited to a maximum of 10 consecutive years within the same company and 12 years across the group structure.
This move is aimed at promoting board renewal and ensuring that corporate leadership does not become entrenched. The new rules also reflect an alignment with Section 355(r)(iv) of the Investments and Securities Act (ISA) 2025, which mandates the SEC to set governance standards for regulated entities.
Importantly, any years already served by current board members will count toward the new tenure limits, preventing a fresh restart of the clock.
New Restrictions on Chairmanship Appointments from Executive Ranks
Another key provision of the SEC’s updated governance framework is the introduction of a mandatory three-year “cool-off” period before a former CEO or executive director can be appointed as board chairman. This is intended to ensure a proper separation between executive influence and board oversight.
Even after meeting the cooling-off requirement, any former executive appointed as chairman will be restricted to a maximum tenure of four years in that position.
Immediate Compliance Required from Public Companies
The SEC emphasized that the directives are to be implemented without delay, urging all public companies and capital market operators to integrate the changes into their board appointment procedures and succession planning strategies.
“The foregoing directives take immediate effect and compliance is mandatory,” the Commission stated, signaling its commitment to tightening governance norms across Nigeria’s capital markets.
These latest reforms are part of the SEC’s broader effort to entrench ethical leadership, safeguard investor confidence, and improve accountability in Nigeria’s corporate landscape.