The Nigerian Exchange Limited, a leading listing and trading platform in Africa, recently partnered with the Nigerian Bar Association and the Institute of Directors, to launch the Corporate Governance Triangle.ItsChief Executive Officer, Temi Popoola, in this interview with MARY NNAH, highlights the value of sound corporate governance in achieving an elevated capital market as NGX, a responsible organisation, leverages collaborations to advance corporate governance standards and practice in Nigeria

Tell us about the rationale behind your recent partnership?

Nigerian Exchange Limited (NGX) in collaboration with the Nigerian Bar Association Section of Business Law (NBA-SBL) and the Institute of Directors, IoD, launched the Corporate Governance Triangle (CGT) in March 2022 to collectively pursue their shared vision and mission of developing and promoting best-in-class corporate governance in Nigeria among members of the business law community, and other corporate stakeholders working in concert with relevant regulators.

CGT was established to leverage the unique positions of the partnering institutions to increase the awareness of corporate governance learnings, orientations, and best practices through stakeholder meetings, interventions, and literature to address contemporary issues surrounding corporate governance practice in Nigeria. 

As key stakeholders in the corporate world, NGX, NBA-SBL, and IOD are in are uniquely positioned to influence their members, share best practices and develop frameworks that will enhance corporate governance in Nigeria.

The Triangle aims to leverage the combined strength of NGX as the premier platform for raising capital in Nigeria and facilitate a thriving secondary market for the trading of securities, NBA-SBL which works to raise the level of business law practice in Nigeria by engendering the professional development of Nigerian commercial lawyers, and the IoD Nigeria represents and promotes directors to various stakeholders and develops best practice corporate governance intending to enhance the economy for business development.

How does sound corporate governance enable the transparency and trust required to keep the financial system running?

Trust is the fundamental value that keeps the global financial system running. The availability of high-quality financial information of companies is critical to the investment decision-making process. Asset managers, investors, and other key stakeholders rely on this information to make informed investment decisions in complying with fiduciary duties toward their clients.

On the other hand, these investing parties rely on the disclosures issued by companies. A breach in trust by the public concerning the quality and relevance of financial information provided to market participants could have a cascading effect that could result in a global crisis as evidenced in the 2009 subprime mortgage crisis.

Effective corporate governance principles are central to establishing trust within the financial market. These foundational principles drive our aspiration to play a leading role in promoting corporate governance across Nigerian Exchange Limited. As a securities exchange, we recognise our truly unique role as an organization that can foster the growth of long-term sustainable capital by positively influencing our key stakeholders to adopt sustainable business practices, including best practice corporate governance.

What are the major objectives of the Corporate Governance Triangle and what role do they play in the advancement of the Capital Market?

Through the CGT, NGX, NBA-SBL, and IOD will work closely together to collectively foster good corporate governance in Nigeria among members of the business law community and other corporate stakeholders working in concert with relevant regulators. This will be achieved by pushing the envelope on existing initiatives aimed at driving corporate integrity such as the Corporate Governance Rating System (CGRS) for listed companies to cover non-listed entities.

Each party has a key role to play to ensure that the objectives of the CGT are achieved. The partnership will involve extensive consultation amongst each other, sharing information to collaborate in respect of the Triangle, organise reciprocal capacity development programs for relevant personnel and members of all the Parties. In addition, the parties will collaborate to identify relevant global and regional developments and topics in corporate governance for inclusion in the curriculum of X-Academy, IoD Nigeria, and NBA-SBL’s professional development program(s) and agree on credit hours for participation in the relevant program(s).

With the NGX seeking to attract more companies to list on the exchange, how does the launch of the Corporate Governance Triangle enhance this drive?  

NGX has remained committed to the highest governance standards, in recognition of its critical role in the capital market ecosystem. Our participation in the CGT positions NGX to leverage the benefits of improved trust and corporate governance, promoting corporate governance across our ecosystem helps to increase investors’ confidence in our platform and, accordingly, provides companies with increased access to a deep pool of domestic, regional, and international investors. In addition, good corporate governance ultimately brings about greater transparency and trust in the Nigerian capital market and positions the Nigerian capital market on a strong pedestal as a leading capital market in the region.

How will the CGT propel the innovation and digital transformation that you are leading with the capital market?

Advancements in corporate governance are increasingly leveraged to enable organisations to manage the recent trends in data and information management as business assets while minimizing risks and costs, and leveraging advances in technology. The digital transformation of the capital market will require the development and expansion of frontiers of corporate governance especially as it applies to new and emerging sectors of the capital market such as fintech, digital currencies, use of Artificial Intelligence, and Machine learning amongst others. NGX will support the CGT in its advances to promote policies aimed at maximizing and improving the capital market’s response to these technological advances while adhering to best practices in corporate governance.

How is the NGX ensuring that activities on the stock market follow all applicable laws and market regulations?

Over the years, NGX has played a leading role in promoting various corporate governance initiatives in the Nigerian market. One leading approach has been through the incorporation of corporate governance principles in NGX’s listing and post-listingrequirements.

Our listing and post-listing requirements, including disclosure standards, incorporate various corporate governance principles and best practices. Therefore, for a company to be listed on NGX’s Premium, Main, and Growth Boards, the company must have demonstrated a strong commitment to high standards of disclosure and corporate governance.

Our Premium Board takes the level of corporate governance to higher standards due to the stringent corporate governance and listing standards required of companies listed on the board. The Premium Board showcases companies that are industry leaders in their sectors and adhere to international best practices on corporate governance. 

Our role in monitoring compliance with these requirements is strengthened by the fact that local and international investors often look to NGX to provide a quality mark for its listed companies.

The Corporate Governance Rating System (“CGRS”) implemented for listed companies by NGX Regulation helps to drive adherence with required corporate governance statutes and recommendations. The CGRS was launched in 2014 through the joint initiative of NGX and The Convention on Business Integrity (“CBI”) with the primary objective of providing a comprehensive, trustworthy diagnosis of Nigerian companies’ corporate governance and business integrity practices. CGRS rates companies listed on NGX based on indicators such as corporate integrity, corporate compliance, understanding of fiduciary responsibilities by their directors, and corporate reputation. The rating system covers themes including Business Ethics & Anti-Corruption, Internal & External Audit, and Control, Shareholder & Stakeholder Rights, Board Structure and Responsibilities, and Transparency and Disclosure.

NGX leveraged the CGRS to create the NGX CG Index, a capitalization-weighted and free float-adjusted index, that tracks the performance of all CGRS-rated companies listed on NGX. Along with other NGX indices, the NGX CG Index allows investors to follow market movements and properly manage their investment portfolios.

CGRS ratings allow our listed companies to differentiate themselves by showing good corporate governance practices and enabling investors to make informed investment decisions. These ratings form part of the criteria for being listed on NGX’s Premium Board and are a key eligibility requirement for admission to the NGX CG Index.

NGX provides dedicated training and capacity building on corporate governance through the X-Academy, our specialised learning centre, which offers a wide range of courses on corporate governance to capital market participants, investors, and the general public.

Our training programmes and workshops on corporate governance are often geared toward helping participants to understand their respective roles in delivering best practice corporate governance for an organisation thereby promoting the adoption of corporate governance best practices in Nigeria.