Three Chief Executive Companies (CEOs) of payments companies may leave next year if the Central Bank of Nigeria (CBN) goes ahead to implement the same governance rule which it has for banks.
In line with commitment to address some corporate governance issues in the deposit money banks the Central Bank of Nigeria governance rule requires Chief Executive Officers of banks to serve a maximum tenure of ten years.
Currently, there has been growing tale in the industry that the CBN is going to implement the same governance rule on the other parts of the financial services ecosystem like payment companies.
BusinessDay called Isaac Okorafor, spokesman of the CBN to confirm the development, he said, “I am busy at the moment please text me.” Meanwhile a message was sent to him, but no response was receieved at the time of filing this report.
The rule if it goes into effect will majorly affect the older companies such as Etranzact, Interswitch, and, SystemSpecs.
It implies that likes of Mitchell Elegbe (Group CEO of Interswitch), Valentine Obi (CEO of Etranzact) and John Obaro (CEO of SystemSpecs/Remita) will prepare leaving the boards and management of their companies before the end of second-quarter (Q2) 2018.
By CBN governance rule, once you have tenured 10 years and above, you are compulsorily required to exit the Board for at least 3 years. When this rule came in 2009, it was only applied only to the commercial banks.
“Now that Switches and Payments Solution Service Providers (PSSPs) are occupying key roles within the economy, everyone is getting scared of what the lack of transparency and corporate governance could have on the financial ecosystem,” an industry source told BusinessDay.
Interswitch was formed in 2002 and has had the same CEO, Mitchell Elegbe, since inception. Two of Interswitch directors, Akeem Lawal and Charles Ifedi could also be affected if CBN implements this rule. However, Ifedi would be leaving Interswitch by January 2018.
Mitchell, Akeem and Charles own a tiny share of the company while the rest is held by institutional investors such as Helios Capital, TA Associates, Zenith Bank and others.
Etranzact (formerly Sybase Nigeria) was founded in 2003 by Valentine Obi who has been the CEO ever since. Etranzact has major investors such as Access Bank Plc, African Finance Corporation (AFC) as core investors.
SystemSpecs was founded in 1992 with John Obaro being the sole owner and CEO since inception.
One of the recent issues that is making regulators restless about corporate governance has to do the brazen product launches and partnerships the likes of which made the Central Bank to fine Interswitch and Etranzact N70million and N450million respectively for illegal international money transfer.
Etranzact consequently made a loss of N6million for third-quarter (Q3) 2017. The company had reported a profit before tax of N178.65million for the same period in 2016. But the technology company’s revenue rose to N2.9billion for the third quarter of 2017, against N2.5billion recorded in the corresponding period of 2016.
Another challenge has been the poor performance of many of the switches and payment providers with some going offline for days or losing data. For instance, the period for most banks to reconcile a failed point-of-sale (POS) transaction most times extend beyond two weeks triggering fear and loss of confidence within the payment system.
Banks have been complaining of reconciliation issues for years without respite. Analysts believe that lack of oversight and independent risk and governance management may also be responsible for much of the poor performance.
Iheanyi Nwachukwu & Hope Moses-Ashike
