Earlier this month, the Nigerian Stock Exchange (NSE) and Nigeria’s Convention on Business Integrity (CBi) announced the launch of a Corporate Governance Rating System (CGRS) that will rank NSE-listed companies based on their corporate governance practices and anti-corruption policies.  The new rating system is designed to promote a more transparent business climate in Nigeria and to attract foreign investment by enabling individuals to better assess the corruption risks associated with NSE-listed companies.

Corruption and weak corporate governance are significant inhibitors of investment in Africa, and Nigeria’s establishment of the CGRS is one of many recent efforts being made across Africa to improve corporate accounting and governance.  The CGRS will implement a multi-stakeholder approach to assess 190 of the NSE’s major listed companies, including Oando PLC, Total Nigeria PLC, and Unilever Nigeria PLC.  According to the Executive Director of CBi, Soji Apampa, the rating system incorporates information acquired through companies’ self-assessments, as well as the experiences of stakeholders and experts.  Rankings will reflect companies’ business policies, internal and external audit and controls, and transparency measures.  Individual board members will be subject to a test reflecting their understanding of their fiduciary duties, and regulators, investors, suppliers and employees will also be subject to interviews.

The NSE’s Chief Executive, Oscar Onyema, has stated that in January 2015, NSE will also create a “Premium Board” listing major Nigerian companies that exhibit the highest standards of corporate governance, as reflected by the CGRS rankings.  By 2015, NSE hopes to use the CGRS rankings to develop and launch a tradable corporate governance index capturing all listed companies.  The current rankings, which were announced on November 3, 2014, reflect the 2013 – 2014 pilot phase of the system’s development, during which a number of listed companies voluntarily submitted to the CGRS assessment.  

Despite the severe poverty experienced by many of its citizens, Nigeria has the largest economy in Africa, with a GDP of $U.S. 510 billion and rich reserves of oil, natural gas, and other resources.  The country’s ranking in the World Bank’s Doing Business report has improved, rising from 175 to 170 over the last year.  Nigeria boasts a significant emerging market and a booming population that is expected to exceed that of the United States’ by 2050.  In light of its unique demographic and economic circumstances, Nigeria’s battle against corruption and ability to attract foreign investment will undoubtedly influence the realization of its substantial economic potential.