The Nigerian Corporate Governance Rating System (CGRS) is a joint initiative between the Nigeria Stock Exchange (NSE) and the Convention on Business Integrity in Nigeria (CBI). The CGRS is designed to rate companies listed on The Nigerian Stock Exchange based on their corporate governance/integrity practices and anti-corruption culture. Qualifying companies would be placed in a tradable basket – corporate governance index – and in addition for such companies that clear certain market capitalization and liquidity criteria, become part of a Premium Board on the NSE.
The primary objective of the CGRS is to raise corporate governance standards nationwide by encouraging companies to do business in a sustainable manner, provide companies with an incentive to develop global best practices, provide opportunities for companies to differentiate themselves and improve the overall perception of and trusts in the Nigeria’s capital markets in the global community. Corporate governance is one of the most straight forward options to incentivize companies and communicate with investors.
The CGRS derives the content for the three components from the following sources: the NSE Listing rules, material needed to establish bonafides from the Nigerian Corporate Affairs Commission, SEC Nigerian Corporate Governance Code, and, as a global best practice benchmark, the United Nations Global Compact reporting guidance on the 10th principle against corruption. These criteria offer an opportunity for companies to distinguish themselves since they go beyond already mandatory Listing Rules.
The first component which is the corporate compliance assessment consist of the company performing a self-assessment of its business and operational practices based on the rules that guide doing business in the country which is subsequently verified by an independent accessor. The second component is the Fiduciary awareness certification test where the board of directors undertake a test to verify their knowledge of their fiduciary awareness. The third component involves stakeholder structured on-line surveys with vendors, business partners and staff as well as discussions with an expert multi stakeholder group comprising of knowledgeable professionals in various fields with relevance to the companies being considered.
The pilot stage comprising of 12 companies was concluded in 2014 with the launch of the premium board where 3 companies were upgraded. The roll out stage for all listed companies is in its final stages of completion and would launch the corporate governance index before the end of 2017.