If you are sitting on the board of a Non-Governmental Organization (NGO) or a non-profit in Nigeria, you are likely driven by passion. You want to solve a problem, help a community, or advance a cause. “Liability” is probably the last word on your mind.
But here is the hard truth: In the eyes of the law, your passion does not grant you immunity.
With the enactment of the Companies and Allied Matters Act (CAMA) 2020, the scrutiny on non-profit governance in Nigeria has tightened. The days of “we are just volunteers, we didn’t know” are fading fast. This brings us to a critical safety net: Directors and Officers (D&O) Liability Insurance.
Is it legally required? Strictly speaking, no. Is it professionally required? Absolutely. Here is everything you need to know.
The “Volunteer” Myth
Many board members in Nigeria operate under the assumption that because they aren’t paid (or are only receiving a sitting allowance), they cannot be sued personally. This is a myth.
Under CAMA 2020, directors and trustees have a fiduciary duty to the organization. If you breach that duty—through negligence, mismanagement of funds, or even a simple error in judgment—you can be held personally liable. That means your personal savings, your car, and your assets could be on the line to settle a legal debt owed by the organization.
What is D&O Insurance?
Directors and Officers Liability Insurance (D&O) is effectively “malpractice insurance” for your board. It protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued by employees, vendors, donors, competitors, or government regulators for actual or alleged wrongful acts in managing an organization.
Is D&O Insurance Mandatory in Nigeria?
Currently, there is no statutory requirement in Nigeria that mandates every non-profit to carry D&O insurance in the same way you must have Third-Party Motor Insurance.
However, it is becoming a commercial and operational requirement for three key reasons:
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The CAMA 2020 Standard: The Act empowers the Corporate Affairs Commission (CAC) to suspend trustees and appoint interim managers in cases of misconduct or mismanagement. If a donor or beneficiary sues your board for “mismanagement” during such a crisis, you need D&O coverage to pay for your legal defense.
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Donor Requirements: International donors (USAID, DFID, Ford Foundation, etc.) increasingly require their grantees to have robust risk management structures. Showing you have D&O insurance signals that your organization is mature and investable.
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Talent Attraction: High-net-worth individuals and experienced professionals are becoming wary of joining boards without protection. If you want top-tier talent on your board, you need to guarantee their safety.
What Does a Standard Nigerian D&O Policy Cover?
When shopping for a policy in Lagos or Abuja, you need to ensure your broker provides coverage for:
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Defense Costs: Lawyers in Nigeria are not cheap. D&O pays for your legal defense, which is often the most expensive part of a claim, even if you are innocent.
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Employment Practices Liability: This is huge. If a former staff member sues the board for “wrongful termination” or “discrimination,” D&O often steps in.
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Mismanagement of Funds: Allegations that the board failed to oversee how a grant was used (note: this covers negligence, not intentional fraud).
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Regulatory Fines: Some policies may cover civil fines and penalties, though this is subject to specific policy wording.
What is NOT Covered?
It is just as important to know the exclusions. D&O will generally not cover:
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Criminal Acts: If a board member steals money (embezzlement) or commits fraud, insurance will not protect them.
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Bodily Injury: If someone slips and falls at your fundraising gala, that is General Liability insurance, not D&O.
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Prior Knowledge: If you knew about a potential lawsuit before you bought the policy and didn’t disclose it, the insurer will deny the claim.
The Checklist: How to Get D&O Insurance in Nigeria
If you are ready to secure your board, here is what your insurance broker will likely require from you to generate a quote:
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Audited Financial Statements: Usually for the last two years. Insurers want to know the organization is not already insolvent.
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The Constitution/Bylaws: To understand your governance structure.
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Board Profile: Who is on your board? Experience matters.
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Loss History: Have you been sued in the past 5 years?
The Bottom Line
In 2025, operating a non-profit in Nigeria is serious business. The regulatory environment is stricter, and the litigious nature of society is increasing.
Don’t wait for a lawsuit to find out if your board is protected. Treating D&O insurance as a “requirement”—even if the law doesn’t explicitly say so—is one of the smartest governance decisions you can make.
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