Banks in Nigeria are stepping up compliance with Environmental, Social, and Governance (ESG) reporting requirements ahead of the 2028 mandatory deadline, as regulatory pressure is reshaping corporate disclosures across the financial sector.
This was disclosed by Assistant Manager for ESG Risks and Disclosures at Harley Reed, Agatha Afemikhe, during an ESG awareness training organised for Nigerian editors.
Afemikhe noted that while banks are making steady progress due to tighter regulatory oversight, other segments of the financial services industry, particularly insurance firms, remain significantly behind.
What the Harley Reed Manager is saying
According to her, banks have shown greater alignment with ESG reporting standards largely due to oversight by regulators such as the Central Bank of Nigeria (CBN) and the Nigerian Exchange (NGX), which require more robust disclosures.
- “The banks are even fine because they are heavily regulated by CBN, NGX, and other institutions they report to,” she said.
This regulatory scrutiny has forced banks to begin integrating sustainability disclosures alongside their financial reporting, in line with emerging global standards.
In contrast, Afemikhe revealed that fewer than 20% of insurance companies in Nigeria are currently compliant with ESG standards, highlighting a significant awareness and implementation gap within the sector.
She noted that some industry leaders still lack a basic understanding of sustainability concepts, despite their role in financing long-term assets and economic activities.
- “Not up to 20% of insurance companies were compliant. Some managing directors still ask what sustainability is,” she said.
The slow pace of adoption, she added, poses risks for the sector as global reporting standards tighten and enforcement mechanisms become more stringent.
More insights
Afemikhe explained that the upcoming International Financial Reporting Standards (IFRS) sustainability disclosure requirements are expected to accelerate compliance across sectors by introducing mandatory reporting and potential sanctions for non-compliance.
- Under the new regime, companies will be required to integrate sustainability disclosures into their financial reports, marking a shift from voluntary reporting to mandatory compliance.
- She urged companies, particularly Public Interest Entities (PIEs), to begin early preparations by engaging their boards and aligning internal systems with the expected requirements ahead of the 2028 deadline.
- Beyond large corporates, Afemikhe noted that small and medium-sized enterprises (SMEs) will also be brought into the ESG reporting framework, with compliance expected by 2030.
However, she clarified that reporting requirements for SMEs will differ from those applicable to larger entities, in line with frameworks such as the IFRS and Global Reporting Initiative (GRI) standards.
She added that the phased approach is designed to ease the transition, ensuring that smaller businesses are not overwhelmed by complex reporting obligations.
Afemikhe emphasised the importance of early adoption, noting that companies that begin aligning with ESG standards ahead of the deadline will be better positioned to avoid regulatory sanctions and attract investment.
She added that integrating sustainability into financial reporting is no longer optional, as global investors increasingly prioritise transparency and responsible business practices.
What you should know
In June 2023, Nigeria became the first African country to adopt globally recognized sustainability-related disclosure standards as it launched the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards (SDS).
The roadmap establishing mandatory reporting for public interest entities by 2028 was launched in collaboration with NGX Group, the Financial Reporting Council (FRC), and the International Sustainability Standards Board (ISSB).
Earlier, the Nigerian Stock Exchange (now NGX) released sustainability disclosure guidelines in 2019.
