ICSAN Sector Governance common mistakes
ICSAN Sector Governance · Understand the traps and how to avoid them.
Quoting the SEC Code of Corporate Governance 2011 as the current national code and describing its principle as 'apply or explain', when the FRC's Nigerian Code of Corporate Governance 2018 (effective 1 January 2020) uses 'apply and explain'. Some candidates go further and describe the NCCG as a statute creating direct legal liability.
Study notes circulate from the pre-2019 era, and the two phrases look interchangeable on a quick read; the code is also taught alongside CAMA 2020, so the boundary between soft law and statute blurs.
What to do instead
Build a one-line chronology: SEC Code 2011 (apply or explain) superseded in practice by the FRC NCCG 2018 (7 principles, effective 1 January 2020, apply and explain, meaning the entity must explain how it applied each principle and why any deviation was in shareholders' interest). In every answer, name the instrument and its status: a code is not a statute; enforceable duties come from CAMA 2020, sector statutes and listing rules. Anchor each point in a named Nigerian instrument rather than generic theory.
Treating every non-executive director as independent, and answering board composition only with formulas such as 'majority non-executive' without applying independence tests (no material commercial relationship, no family or cross-directorship ties, not a recent employee or audit partner, no shareholding above the stated threshold, no long tenure).
Textbook summaries list 'independent non-executive director' as a category without the disqualifying connections, and candidates reproduce the label instead of the criteria.
What to do instead
State the criteria as tests the candidate must run against a named person: relationship to the company, its advisers or its management; shareholding level; length of service; former employment or partnership; family ties. Then explain why independence matters structurally - it underwrites the separation of chairman and CEO, chairs of audit and remuneration committees, and the credibility of challenge in the boardroom. Offer to name which specific directors fail which test.
Giving one universal governance answer across listed companies, banks, insurers, pension operators and private companies, instead of layering the framework: NCCG plus CAMA 2020 plus the sector regulator's own code (CBN, NAICOM, PENCOM, SEC) plus NGX listing rules. Typical slip: applying the CBN code's prior-approval and tenure regime to an insurer, or ignoring CAMA 2020 reliefs for small companies.
The domains overlap heavily, and a single 'board best practice' paragraph scores partly in many questions, so candidates never learn to differentiate the regulatory stack.
What to do instead
For any entity, work the stack in order: statute (CAMA 2020, BOFIA, ISA, PIA, NCA), sector regulator code and circulars, national code, listing rules, then internal governance documents. Flag where they conflict and which prevails - regulator prudential requirements normally sit on top. Note CAMA 2020's small-company reliefs (audit exemption, no mandatory company secretary) and say expressly that sector codes can be stricter than the NCCG.
Describing a ministry, department or state-owned entity as if it were a listed company: talking only about 'shareholders' and a board, while omitting the accounting officer (permanent secretary or director-general), the supervising minister's oversight role, Treasury Single Account and procurement controls, and oversight by the Auditor-General and Public Accounts Committees.
Private-sector models are over-rehearsed, and public-sector governance is learned as a list of institutions rather than as an accountability chain.
What to do instead
Draw the chain explicitly: citizens and the legislature at the apex; supervising ministry for policy and performance oversight; board for strategy and oversight of management; accounting officer personally answerable for funds and for compliance with the Fiscal Responsibility Act, Public Procurement Act and financial regulations; then external assurance from the Auditor-General and legislative scrutiny. Say who is answerable for what, and note that a board chair is not an accounting officer.
Stating that internal audit reports to the managing director, or crediting internal audit with owning and operating the internal control system. Related slip: treating risk management as a compliance function that produces a risk register for the audit committee to 'approve and file'.
In practice many Nigerian entities still place internal audit under the CEO, so candidates describe the world they have seen rather than the model the examiner is testing.
What to do instead
Use the three lines model: management owns and operates controls (first line), risk and compliance functions set frameworks and monitor (second line), internal audit gives independent assurance (third line), with the board and audit committee at the top. Internal audit reports functionally to the audit committee and administratively to the CEO, with unrestricted access and an approved charter. Distinguish risk appetite (board-set tolerance) from the risk register (management's tool) and from internal control (the system of controls).
Applying company language to not-for-profits, cooperatives and NGOs - talking about 'shareholders', 'profit distribution' and 'one share, one vote' - or restricting the answer to charitable intent while ignoring the statutory and constitutional governance architecture.
The vocabulary of company law is the default in candidates' heads, and third-sector governance is often studied as ethics rather than as an entity form with its own instruments.
What to do instead
Reset the vocabulary. Cooperatives: democratic member control (one member, one vote regardless of capital), the ICA cooperative principles, member economic participation, surplus as patronage dividend rather than profit, and a supervisory committee alongside the board under cooperative societies legislation. Incorporated trustees and NGOs: CAMA 2020 Part F, registration and annual returns to the CAC, trustee duties, conflict-of-interest and restricted-benefit rules, and donors plus beneficiaries as the real accountability stakeholders.
Asserting that Nigeria has a comprehensive federal whistleblower protection statute that shields reporters from retaliation, or describing whistleblowing as indistinguishable from an employee grievance procedure; channels are described vaguely as 'report to your line manager'.
Policy documents, draft bills and sector rules are conflated into an assumed Act, and whistleblowing is confused with HR complaint handling.
What to do instead
Be precise about sources: the 2016 Nigerian Whistleblowing Policy (Federal Ministry of Finance) with its reward tied to recovered funds (commonly cited as 2.5–5%) and reporting to agencies such as EFCC and ICPC; sector rules and codes that require internal channels; the long-pending whistleblower protection bill. Explain the design of an internal regime: multiple channels including an anonymous hotline, an independent reporting line to the audit committee, confidentiality, documented anti-retaliation measures, triage and investigation, and reporting of outcomes to the board.
Reducing shareholder rights to 'attending the AGM and asking questions', and merging shareholder rights with stakeholder engagement. Missing the mechanics: notice periods, proxies, written resolutions, demand for a poll, class rights, minority actions, and electronic participation.
AGMs dominate the anecdotal literature, and 'stakeholders' and 'shareholders' sound like the same audience in exam phrasing.
What to do instead
Separate the two and list the mechanics. Shareholders as owners exercise rights through general meetings (statutory notice, proxies, polls, e-meetings permitted for public companies under CAMA 2020), written resolutions, information rights, appointment and removal of directors and auditors, approval of remuneration, and minority remedies against oppression or breach of duty. Stakeholders - employees, creditors, host communities, regulators - have interests protected mainly through disclosure, consultation and specific statutes. Show how the company secretary operationalises each right.
Answering disclosure questions with a list of the financial statements, and treating transparency as a moral attitude. Omitting the apply-and-explain statement, related-party transactions, directors' remuneration, board evaluation outcomes, risk and internal control statements, and filing deadlines to the CAC and the exchange.
Disclosure is memorised from accounting syllabi, and the governance layer of the annual report is skimmed as boilerplate.
What to do instead
Structure the answer as four blocks: statutory filings (annual return and accounts to the CAC, notices and meetings); market disclosure (listing-rule obligations, price-sensitive information, periodic reporting); governance disclosure (apply-and-explain statement, board composition and independence, committee membership and meetings, remuneration policy, related-party transactions, board evaluation, whistleblowing statistics); and voluntary/sustainability reporting (ESG, anti-corruption). Add the timeliness and accuracy dimension - late or selective disclosure is itself a governance failure.
Naming the NNPC as the upstream regulator of the Nigerian oil and gas industry after the Petroleum Industry Act 2021, or treating NNPC Limited as a ministry. In family-business and SME questions, the parallel slip is conflating the family council, family assembly and board.
The pre-2021 institutional map is deeply embedded in older material, and the post-PIA split into a commercial company and two regulators is recent enough to be under-rehearsed.
What to do instead
Memorise the PIA 2021 architecture: NUPRC regulates upstream, NMDPRA regulates midstream and downstream, and NNPC Limited is a commercial national oil company incorporated under CAMA 2020 with shares held by the state - a regulated entity, not a regulator. Add host community development trusts as governed entities. Then show the transferable method using telecommunications (NCC under the NCA) and family businesses (family assembly, family council, family constitution, independent board, succession plan as separate bodies).