A Commentary On The Nigerian Public Sector Governance Draft Code 2024 – Government Policy & Public Finance

Introduction

Public sector governance is aimed at ensuring that Public Sector
Entities (PSEs) not only fulfill their mandates and achieve their
intended outcomes but also operate within the bounds of ethical
integrity, transparency, efficiency, and effectiveness. The Nigeria
Public Sector Code of Corporate Governance 2023(referred to as
“the draft Code”) encompasses a comprehensive definition
of PSEs. This includes all ministries, extra-ministerial offices,
departments, agencies of government across all tiers, state-owned
corporations, companies, entities, and all branches of government.
The draft Code’s objective is to bolster and refine the
governance frameworks governing PSEs.

Embracing an integrated perspective, the draft Code regards the
public sector as a fundamental component of society, built on the
tenets of inclusivity and the pursuit of sustainable development.
The structure of the draft Code is tripartite, consisting of
Principles, which articulate the foundational philosophy of each
segment; Intended Outcomes, which delineate the goals to be
achieved; and Recommended Practices, which are a compendium of
actions, procedures, and processes that PSEs are encouraged to
implement in order to realize these outcomes.

This commentary delineates the key elements of the draft
Code. In addition to the enabling legislations establishing
various PSEs, the draft Code applies to all PSEs. 

Compliance Obligation of PSEs and Enforceability of the draft
Code

The draft Code adopts an “apply and explain”
methodology. This requires the implementation of all principles
contained within the draft Code and a detailed explanation of their
application. Should there be a departure from the established Code,
PSEs are required to substantiate whether the principles of sound
governance are attainable through alternative methods and to
provide a rationale behind such departure in their governance
statement. This statement should be an annexure to the PSEs’
annual financial reports.

Furthermore, in instances where there is non-adherence to
specific mandates of the draft Code, PSEs are mandated to outline
remedial measures and establish timelines to attain full
compliance. These measures and schedules must be articulated within
the governance statement of the PSE.

Governance Framework of PSEs

Governing Bodies of PSEs

PSEs are required to have a governing body responsible for
developing a written policy document or charter. The policy
document or charter is to be reviewed and updated annually. Amongst
other things, the policy document or charter must set out the
unique mandate of each PSE, and roles and responsibilities of its
governing body. The draft Code prohibits PSEs from operating for a
period exceeding 6 (six) months without an established Governing
Body, unless otherwise provided by extant law.

The draft Code sets out the composition of the Governing Bodies
of ministries, departments and other arms of government in the
federation to include the Honourable Minister(s), Heads of
Extra-ministerial Office, or Head of the Government Arm, Permanent
Secretary or his equivalent in the other arms and levels of
Government, Heads of Department, two (2) Retired Civil
Servants and three members from the non-public sector. The
Governing Body must also appoint a secretary who must be a legal
practitioner, professional accountant or chartered secretary. The
draft Code also sets out the qualification for membership of
Governing Bodies of PSEs and provides that appointment or removal
of members should be in accordance with the provisions of the
charter of the Governing Body and subject to extant laws and
regulations.

The draft Code provides that the Governing Bodies of parastatals
and agencies must be composed of persons who are nominated on the
basis of qualifications, knowledge and skills possessed. All
appointments must be based on merit. Furthermore, the draft Code
provides that appointments of members of the Governing Body and
senior management should be based on objective criteria, merit and
with due regard to diversity in skills, experience, age, cultural
background and gender within the framework of relevant government
policies.

The draft Code stipulates that the Governing Body of parastatals
and agencies must be made up of a minimum of two (2) executive
members and non-executive members (which must exceed the number of
executive members) subject to the requirements of any extant laws.
The draft Code clearly spells out the duties of executive and
non-executive members as well as independent nonexecutive
members.

Committees of Governing Bodies of
PSEs

The draft Code stipulates that every PSE is required to have a
minimum of three committees: Audit and Risk Management Committee;
Finance and General Purposes Committee and Governance Committee.
Also, a charter that provides for the terms of reference of these
committees must be established. The draft Code further elaborates
on the composition and responsibilities of these committees.

It is noteworthy that the draft Code emphasises diversity beyond
gender and states that diversity policies of PSEs should ensure
that each PSE is getting a mix of experiences and perspectives. The
draft Code further requires every PSE to have an induction policy
document that will provide for adequate induction programmes
for new and existing members of the Governing Body. Also, PSEs are
required to conduct training of members of the Governing Body at
least once a year. Governing Bodies are also required to ensure
that the continuing education programmes assist members in
developing their skills and capabilities in such a way that they
are up-to-date on emerging trends within the PSE’s business
and operating environment.

Performance Management and Evaluation

The draft Code recommends that a formal and productive procedure
to assess the efficiency and effectiveness of the governing body,
senior management and all office cadres in line with the mandate of
each PSE should be established. The Performance Management and
Evaluation (“PME”) process is aimed at improving
performance, fairness and equity, effective talent management, and
alignment of rewards and recognition as it relates to the governing
bodies, senior management and all office cadres of PSEs.

The rationale of the PME is to enhance a productive and
responsive public service and strong governance. The draft Code
further recommends that this formal procedure for the Governing
Body should be overseen by its Governance Committee and sets out
the goals and subjects of the evaluation policy of the Governing
Body, the committees of the Governing Body and members of senior
management.

Remuneration Governance

Under the draft Code, the Governing Body is to ensure that the
PSE remunerates fairly, responsibly and transparently to promote
the achievement of the strategic objectives of the PSE. A fair
remuneration is aimed at attracting, motivating and retaining the
right talents in the Governing Body and Senior Management for
increased productivity and sustainability. The draft Code further
sets out recommended practices for the PSEs to achieve a fair,
responsible and transparent remuneration.

Financial Management and Reporting

In recognition of the importance of a sound framework for
financial management and reporting, the draft Code establishes a
set of recommended practices for financial management and reporting
for PSEs. These recommended practices include keeping proper
financial accounts and records, compliance with financial reporting
process and rules as issued by the FRCN, monitoring the
implementation of approved budgets, and auditing the financial
statement of PSEs.

The draft Code further states that the intended outcome of these
recommended practices is to establish a systematic and transparent
procedure for efficient management of public financial resources,
an appropriate reporting framework and a fair and understandable
assessment of the PSE’s financial management and
reporting.

Transparency and Disclosure

The draft Code recommends certain practices aimed at fostering
Transparency and disclosure in the public sector, strengthen
accountability and build trust in the PSE. These practices include
amongst others; sharing timely, relevant and accurate information
with stakeholders and making full and comprehensive disclosure of
matters relevant to stakeholders and matters set out in the draft
Code.

Code of Conduct and Ethics

The draft Code mandates the Governing Body of every PSE to
develop and adopt a comprehensive code of conduct and ethics for
the PSE. The draft Code of Conduct and Ethics should set out the
ethical standards and behaviors of individuals associated with the
PSE, amongst other things. The Governing Bodies of PSEs are also
required to establish policies, procedures and processes for the
regulation of conflict of interest and related party transactions,
whistleblowing, and anticorruption matters.

Sustainability

The draft Code mandates every PSE to pay adequate attention to
sustainability issues such as environmental, social, occupational
and community health and safety. The draft Code urges PSEs to
develop frameworks that ensure the adoption of processes and
practices aimed at achieving sustainability.

Conclusion

This Code supersedes all previous codes and guidelines,
applicable to the public sector. Furthermore, all PSEs within the
State Government and the Area Councils of the FCT are expected to
comply with the draft Code before 1st January
2026 while PSEs within the Local Governments are expected
to comply before 1st January 2027.

While the draft Code adopts an “Apply and Explain”,
and does not prescribe penalty for non-compliance, adherence to the
provisions of the draft Code would enhance the fulfillment of the
mandates of various public sectors, for the benefit of the citizens
and service users.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.