Strengthening the SMEs: Insights from the new SME Corporate Governance Guidelines 2023

On May 30, 2024, the Financial Reporting Council of Nigeria (FRCN) unveiled the SME Corporate Governance Guidelines 2023 (“The Guidelines”), a significant milestone aimed at bolstering the governance framework for Micro, Small, and Medium Enterprises (MSMEs) in Nigeria.

Given that MSMEs constitute 96% of all businesses in Nigeria, account for 84% of national employment, and represent 48% of Nigeria’s GDP, the Guidelines are poised to make a substantial impact on the country’s economic landscape.

This review delves into the key provisions within the Guidelines, examining their implications and offering practical steps for Nigerian SMEs to implement them.

The Objectives and Benefits of the Guidelines

The primary aim of the Guidelines is to enhance Nigeria’s business environment, improve the longevity and sustainability of SMEs, and increase business confidence and access to capital. By adopting robust corporate governance practices, SMEs can reap several key benefits:

  1. Robust Business Processes: Establishing clear structures and procedures leads to more efficient operations.
  2. Preparation for Growth: Good governance fosters transparency and accountability, paving the way for future expansion.
  3. Enhanced Attractiveness: Adhering to the Guidelines makes SMEs more “bankable” and attractive to investors.
  4. Improved Stakeholder Relationships: Transparency and accountability build trust with stakeholders, resulting in stronger relationships.
  5. Long-Term Sustainability: Good governance sets the foundation for responsible and sustainable business practices.

Core Provisions of the Guidelines

The Guidelines consist of seven sections and outline ten core principles applicable to all SMEs operating in Nigeria. Here are the highlights:

Corporate Governance Policies and Procedures

  • Adoption of a formal corporate governance framework detailing stakeholder roles.
  • Development of a written document outlining the delegation of authority and management roles.
  • Establishment of a formal succession plan with a skills matrix and training opportunities.

Board of Directors

  • SMEs are encouraged to set up a formal Board of Directors with 5-10 members.
  • Adoption of formal procedures for board meetings and consideration of Independent Non-Executive Directors.
  • Implementation of a tailored induction process for all directors and regular performance evaluations.

Control Environment

  • Accurate and reliable accounting records and financial statements in accordance with FRCN’s financial reporting framework.
  • Evaluation of the external auditor’s effectiveness and establishment of an IT Governance framework.
  • Adoption of an appropriate internal control framework and consideration of an Internal Audit function.

Stakeholder Engagement

  • Formulation of policies outlining values and objectives for stakeholder engagement.
  • Setting and monitoring targets related to stakeholder relationship management.

Family-Run Entities

  • Development of a framework for the family’s relationship with the business and clear lines of authority.
  • Establishment of written procedures for effective coordination and communication between family members and other stakeholders.

Environmental, Social, and Governance (ESG) Considerations

  • Consideration of environmental and social responsibility in operations.
  • Commitment to relevant best practice standards and systematic review of governance practices.

Transparency and Shareholder Relations

  • Establishment of timely, open, and transparent information flow with investors and shareholders.
  • Comprehensive disclosure of material matters and inclusion of a corporate governance report in the annual report.


The Corporate Governance Guidelines for SMEs 2023 provide a valuable framework for Nigerian SMEs to strengthen their corporate governance practices. By embracing these recommendations, SMEs can achieve greater transparency, accountability, and overall business success, thereby attracting investment, improving stakeholder relationships, and contributing to long-term sustainability.

To further drive the importance of corporate governance for SMEs, the Society for Corporate Governance Nigeria is organizing a stakeholder engagement for Startups and SMEs on Thursday, July 11, 2024 themed “Building Reputation and Trust for Sustainable Growth: The Role of Corporate Governance”. To Par participate in this crucial engagement. Register here.


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