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EXPLORING THE ROLE OF CORPORATE GOVERNANCE IN PREVENTING CORPORATE SCANDALS IN NIGERIA (CASE STUDY: UNITY BANK PLC)
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Corporate governance encompasses the structures, processes, policies, and mechanisms through which companies are directed, controlled, and held accountable to stakeholders, emphasizing transparency, accountability, board oversight, ethical conduct, and risk management (Egejuru, 2024). In the banking sector, effective corporate governance is particularly critical due to the fiduciary role banks play in mobilizing deposits, managing systemic risk, and supporting economic stability. Weak governance has repeatedly been linked to excessive risk-taking, insider abuse, fraudulent financial reporting, and outright corporate scandals (Offor, n.d.; Eshiet, various works on fraud risk).
Globally, high-profile collapses such as Enron (2001) and WorldCom exposed failures in board independence, audit oversight, and executive accountability. In Nigeria, the banking industry has experienced recurrent crises rooted in governance deficiencies. The 2009–2010 banking crisis saw several institutions, including Oceanic Bank, Intercontinental Bank, and Afribank, nearly collapse due to poor credit risk management, insider lending, non-performing loans, executive overreach, and inadequate board oversight. These events necessitated Central Bank of Nigeria (CBN) interventions, the establishment of the Asset Management Corporation of Nigeria (AMCON), and the injection of trillions of naira to stabilize the sector.
Subsequent failures have persisted despite regulatory reforms. Notable cases include the nationalization of Skye Bank Plc in 2018 and the liquidation of Heritage Bank Plc in 2024, alongside interventions in other banks in 2021–2024 attributed to regulatory non-compliance, corporate governance lapses, excessive risk-taking, and disregard for prudential guidelines. These incidents highlight ongoing challenges such as weak enforcement of governance codes, political interference, neo-patrimonial influences, sociocultural legacies that undermine formal mechanisms, institutionalized corruption, and conflicts between regulators and operators (Ololade et al., 2019; various recent studies on banking distress).
In response, Nigeria has evolved its regulatory framework. The CBN issued the Code of Corporate Governance for Banks in 2006, with further revisions. The Financial Reporting Council of Nigeria (FRCN) introduced the broader Nigerian Code of Corporate Governance (NCCG) 2018, which applies to all sectors and stresses board composition (including independent non-executive directors), audit and risk committees, ethical leadership, disclosure requirements, and stakeholder engagement. Empirical studies continue to show mixed or context-specific impacts of these mechanisms on performance and scandal prevention, with board independence, non-executive director presence, and strong credit risk management often positively associated with better risk-adjusted returns, while oversized boards or excessive independence can sometimes be counterproductive (Adegbayibi et al., recent West African study; various 2024-2025 studies on DMBs).
Unity Bank Plc, established in 2006 through the merger/consolidation of nine legacy banks under the CBN’s banking sector recapitalization program, serves as a pertinent case study. As a mid-tier deposit money bank focused on retail, SME, and commercial banking, Unity Bank operates under the same regulatory regime (CBN Prudential Guidelines, NCCG 2018, and anti-fraud/AML frameworks). While it has not featured among the most high-profile collapse cases, the bank has faced financial pressures (including reported significant losses in recent periods), merger-related integration challenges (e.g., with Providus Bank discussions or actions), and industry-wide governance scrutiny. Examining its governance practices board structure, committee effectiveness, internal controls, compliance culture, and response to regulatory directives provides insight into whether and how formal mechanisms translate into scandal prevention in a Nigerian banking context characterized by enforcement gaps and informal influences.
Recent scholarly work underscores that while governance codes exist, their effectiveness in preventing scandals depends on genuine implementation, ethical tone at the top, professional integrity (especially among accountants and auditors), and robust regulatory enforcement rather than mere compliance on paper (Egejuru, 2024; research on fraud prevention in Nigerian deposit money banks, 2025; Kokogho on risk management frameworks).
1.2 Statement of the Problem
Despite the introduction and revision of corporate governance codes, scandals and distress episodes persist in the Nigerian banking sector, leading to loss of depositor and investor confidence, systemic risks, substantial public bailouts, and erosion of public trust. Key recurring issues include board capture, weak risk oversight, insufficient independent directors, poor ethical culture, and selective enforcement (Samuel on auditing and fraud; Zango on governance and disclosure).
In the specific context of Unity Bank Plc, concerns persist regarding the practical effectiveness of its governance arrangements amidst financial difficulties and broader sector pressures. Without a thorough investigation of implementation realities at the firm level, policy reforms may remain superficial, sustaining vulnerability to scandals (various 2024-2025 empirical works on corporate governance and fraud in DMBs; Eshiet on fraud risk management).
1.3 Objectives of the Study
The main objective is to explore the role of corporate governance in preventing corporate scandals in Nigeria, with a case study of Unity Bank Plc.
Specific objectives include:
- To examine the corporate governance structures and practices in Unity Bank Plc.
- To assess the effectiveness of these mechanisms in detecting/preventing unethical conduct, fraud, or regulatory breaches.
- To evaluate the influence of regulatory frameworks and enforcement on governance outcomes at Unity Bank.
- To identify challenges, gaps, and contextual factors hindering effective governance in the bank and the broader Nigerian banking sector.
1.4 Research Questions
- What are the key corporate governance structures and practices operational at Unity Bank Plc?
- How effective have these practices been in preventing or mitigating corporate scandals/misconduct?
- To what extent do Nigeria’s regulatory frameworks (particularly NCCG 2018) shape governance implementation at Unity Bank?
- What challenges impede effective corporate governance in preventing scandals within Unity Bank and the Nigerian banking industry?
1.5 Significance of the Study
This study contributes to the growing body of empirical literature on corporate governance in emerging markets, particularly post-2018 NCCG Nigeria, by providing firm-level insights from a mid-tier bank. It offers practical value to regulators (CBN, FRCN, NDIC), bank boards, investors, and practitioners on enhancing implementation. The findings may inform policy refinement, capacity building, and adoption of context-specific mechanisms to reduce future scandals and strengthen sector resilience.
1.6 Scope of the Study
The study focuses on corporate governance mechanisms and their role in scandal prevention at Unity Bank Plc, primarily covering the period from the adoption of the NCCG 2018 through recent years (approximately 2018–2025/2026), drawing on available annual reports, regulatory filings, publicly reported events, and governance practices. It is limited to governance variables (board, committees, risk/audit oversight, ethics) rather than exhaustive financial performance analysis.
1.7 Limitations of the Study
Access to internal proprietary documents, detailed board minutes, or whistleblower reports may be restricted. Reliance on publicly available data and secondary sources could limit depth on internal cultural or enforcement dynamics. As a single-case study, findings may not be fully generalizable to all Nigerian banks, though patterns are likely illustrative of mid-tier institutions.
1.8 Organisation of the Study
The thesis is organized into five chapters: Chapter One (Introduction), Chapter Two (Literature Review and Theoretical Framework), Chapter Three (Research Methodology), Chapter Four (Data Presentation, Analysis and Discussion), and Chapter Five (Summary, Conclusions and Recommendations).
References
Adegbayibi, T. E., et al. (2025). Corporate governance mechanisms and performance of banks in Africa: Empirical evidence from Nigeria. International Journal of Business and Society. https://learning-gate.com/index.php/2576-8484/article/download/5115/1893/7166
Bala, S. A., Aliyu, A. A., & Bakare, T. O. (2020). Effect of corporate governance on financial performance of deposit money banks in Nigeria. International Journal of Academic Research in Business and Social Sciences. (Cited in multiple recent studies, including 2025 reviews).
Egejuru, [Initials]. (2024). Corporate governance and fraud prevention in Nigerian deposit money banks. ResearchGate publication. (Representative of recent works on governance-fraud links).
Eshiet, [Initials]. (Various dates, recent compilations 2024–2025). Fraud risk management and corporate governance in Nigerian banks. (Referenced in fraud prevention literature).
Kokogho, [Initials]. (2025). Risk management frameworks and corporate governance in deposit money banks. RSIS International Journals.
Manukaji, I. J. (2018). Corporate governance and income smoothing in the Nigerian deposit money banks. Journal of Financial Reporting and Corporate Governance. (Updated citations in 2025 FRC journal).
Offor, [Initials]. (n.d./recent citations 2025). Corporate governance and investor decisions in quoted deposit money banks in Nigeria. European Journal of Business and Management Research.
Okene, K., Chinwo, C., & Ikeh, [Initials]. (2025). Poor corporate governance and its consequences on the Nigerian banking sector. Serbian Journal of Management, 5(2), 243–250. (Cited in FRC Journal 2025).
Okolie, [Initials], & Ogbaragu, [Initials]. (Recent, cited 2024–2025). Corporate governance and financial performance correlations in Nigerian banks.
Ololade, R. A., et al. (2019). Corporate governance failures and banking crises in Nigeria. (Frequently cited in post-2020 studies on persistent challenges).
Zango, [Initials]. (Recent, 2024–2025). Corporate governance, disclosure, and fraud risks in Nigerian deposit money banks.