To achieve good performance in an economy that has continuously been in ‘slow motion’, the World Bank has recommend ‘4-ward’ corporate governance guides for Nigerian businesses.
The ‘4-ward’ corporate governance guide recommended for Nigerian businesses by the Washington-based lender are: Look Forward (Strategically), Look Backward (Retrospectively), Look Inward (Reflectively), and Look Outward (Engagingly).
The international financial institution said Thursday that overall, companies that are well-governed have the tendency to excel.
Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place to help yield good performance.
“Nigerian companies are lagging in the implementation of corporate governance, and also the ability to align the codes with their business needs,” Chinyere Almona, Head, IFC (World Bank Group) Africa Corporate Governance Program (Advisory) said at the Institute of Internal Auditors Nigeria’s (IIA) conference in Lagos.
According to Chris Ogbechie, a professor in the Department of Strategy and Entrepreneurship, Lagos Business School (LBS), strong governance is part of a successful business strategy.
“Good governance can enhance an organisation’s competitive position, assist in retaining superior employees, attract top-notch directors, and contribute to long-term improved financial performance,” the professor said at the conference with the theme; Growing & Sustaining Governance in Public and Private Institutions.
The benchmark performance indicator of the Nigerian equities market was in broad retreat on a companies’ poor half-year (H1) results.
Economic activities in Africa’s largest economy slowed to 1.94 percent in the third quarter, from a revised 2.01 percent reported in the second quarter of 2019, data from the National Bureau of Statistics show.
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The consumer goods industry for example generated less cash from sales in mid-year 2019 amid a challenging operating environment. Analysis of the operating cash of ten players including Nestle, Cadbury and Nigerian Breweries, revealed that cash flow to revenue slumped to 6.4 percent in the first half of 2019 compared with 17.3 percent a year before.
Firms’ worsened cash efficiency was on the back of weaker cash receipts from operations which dipped some 19 percent to N92.4 billion from N114.8 billion last year.
Checks by BusinessDay revealed that since 2015, the Nigerian economy has been growing at a pace slower than the country’s population growth rate, meaning the country is producing more people than it can feed.
A recent report by the World Bank on emerging markets revealed that companies with better corporate governance attracted better average credit risk rating (CRR) by almost 1.50 points and they were also the companies that during investment period that achieved about 20 percent higher performance.
Meanwhile, the Financial Reporting Council (FRC) of Nigeria recently released the Nigerian Code of Corporate Governance (‘the Code”) on January 15, 2019 pursuant to Sections 11(c) and 41(c) of the Financial Reporting Council of Nigeria Act, 2011. The issuance of the Code stemmed from the suspension of the National Code of Corporate Governance 2016 (the “2016 Code”) by the Federal Government of Nigeria. The Code highlights key principles that seek to institutionalise corporate governance best practices in Nigerian companies.
According to Humphrey Okorie, the CEO of IIA Nigeria, this year’s IIA Nigeria conference was focused on equipping internal auditors to fulfil their vital role of corporate governance as it will assist them to take the lead in providing assurance and advisory services in governance to aid their organisation to begin to sour high as an eagle.
“This would, in turn, enable your business to excel above and beyond on all key indices of success,” Okorie said in his welcome address.
In his speech, Rabiu Olowo, Commissioner of Finance, Lagos State, said “as we all know, there is widespread understanding and acceptance of the important role that good governance plays in the success of organizations. While giant strides have been taken on this subject in the private sector, the public sector is still playing catch-up,”
This was affirmed by Ogbechie ,as he disclosed that the lack of good governance in the public sector is the biggest negative driver of ease of doing business in Nigeria. “To take advantage of the Africa Continental Free Trade Agreement we must improve our ease of doing business. Otherwise, we remain a destination for goods made in other African countries,” he recommended.
