BY EMEKA EJERE
The sack on Thursday of the entire board of directors of FBN Holdings Plc and its subsidiary First Bank of Nigeria Ltd by the Central Bank of Nigeria (CBN) may have opened a new page in the history of the nation’s oldest financial institution.
It will also go down in history as a bold statement by the banking sector regulator that it can go to any length against any perceived threat to its mandate of protecting banks and the banking public.
An alleged plan by factions with vested interest had on Wednesday culminated in the removal of Dr. Adesola Adeduntan as managing director and chief executive officer of First Bank Ltd and his replacement with Gbenga Shobo. The appointment was disclosed in a statement made by the (now) sacked chairman of the bank, Mrs. Ibukun Awosika.
“We are proud to announce Gbenga Shobo as our new MD/CEO. His appointment has proven the resilience of our succession planning mechanisms and the value we place on our long-standing corporate governance practices, which underpin the institution’s enduring sustainability and the 127-year legacy,” Awosika had stated.
However, the CBN in a query to First Bank expressed concern that the appointment of Shobo was done without the approval of the apex bank.
“The attention of the Central Bank of Nigeria (CBN) has been drawn to media reports that the Board of Directors has approved the removal of the current managing director of the bank, Dr. Sola Adeduntan, and the appointment of a successor to replace him”, CBN stated in the query.
“The CBN notes with concern that the action was taken without consultations with the regulatory authorities especially the CBN given the systemic importance of First Bank Ltd.”
The apex bank also claimed that the tenure of Mr. Adeduntan was yet to run out (bank MD’s have a maximum 10 years) and that they were also not aware of any misconduct of the former MD and as such there was no justification for his removal.
“Given that the tenure of Dr. Adeduntan is yet to expire and the CBN was not made aware of any report from the board indicting the Managing Director of any wrong-doing or misconduct, there appears to be no apparent justification for the precipitate removal.”
The rumble within the bank is widely believed to have started after Awosika received a letter from the apex bank stating that the tier 1 lender had not complied with regulatory directives to divest its interest in Honeywell Flour Mills “despite several reminders” to it by the apex bank.
The CBN also stated in the letter that it was giving the bank within 48 hours to ensure Honeywell repays its obligation to it “failing which the CBN will take appropriate regulatory measures against the insider borrower and the bank.”
It also instructed the bank to divest from its holdings in Bharti Airtel Nigeria Ltd and Honeywell Flour Mills within 90 days. These loans, it was learnt, are all related to the chairman of the Holdco, Oba Otudeko.
Following the sacking of the board, the CBN constituted new boards for FBN Holdings and the banking subsidiary. For FBNH, the apex bank appointed Dr. Fatade Abiodun Oluwole, Kofo Dosekun, Remi Lasaki, Dr. Alimi Abdulrasaq, Ahmed Modibbo, Khalifa Imam, Sir Peter Aliogo, and U.K Eke (Managing Director) with Remi Babalola as chairman.
Similarly, for First Bank Ltd, Tokunbo Martins, Uche Nwokedi, Adekunle Sonola, Isioma Ogodazi, Ebenezer Olufowose, Ishaya Elijah B. Dodo were appointed directors with Tunde Hassan-Odukale as chairman. The CBN also confirmed the reinstatement of Sola Adeduntan as managing director; Gbenga Shobo as deputy managing director; and Remi Oni and Abdullahi Ibrahim as executive directors of First Bank of Nigeria Ltd.
The CBN governor, Mr. Godwin Emefiele, at a press briefing stated that the apex bank had been keeping close tabs on First Bank over the past five years having discovered that the bank was in “grave financial condition with its Capital Adequacy Ratio (CAR) and Non-Performing Loans ratio (NPL) substantially breaching acceptable prudential standards.”
According to Emefiele, “the insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank.
The CBN’s recent target examination as at December 31, 2020 revealed that insider loans were materially non-compliant with restructure terms (e.g. non perfection of lien on shares/collateral arrangements) for over three years despite several regulatory reminders. The bank has not also divested its non-permissible holdings in non-financial entities in line with regulatory directives.”
Emefiele also reassured First Bank of Nigeria depositors, creditors and other stakeholders of the bank of its commitment to ensure the stability of the financial system insisting that it acted to protect 31 million customers, minority shareholders of First Bank of Nigeria Ltd.
Step in right direction
In an interview with Business Hallmark, former president, Chartered Institute of Bankers of Nigeria (CIBN), Mr. Okechukwu Unegbu, commended the CBN for the intervention, saying such will give the investors the impression that their investments are safe in event of any eventuality.
Unegbu said, “What the CBN did is the right thing. It tells the investors (both foreign and local) that should anything happen to the bank, the CBN will intervene to ensure that their investments are saved.
“I think there’re a lot more going on in that bank than we know. The federal government should send the anti-graft agencies to find out more. Even the new board that has been constituted, I’m not satisfied with some of those appointed. Some of them have questionable characters.
“So, CBN should do more due diligence. I understand their appointments are just for the meantime.”
Also speaking with Business hallmark, Mr. David Adonri, executive vice-president, Hicap Securities, described the move by the CBN as a welcome development capable of restoring investors’ and customers’ confidence.
He said, “The measures taken by CBN are welcome because they will restore investors’ and customers’ confidence. What is happening in First Bank is a complete mess. Oba Otudeko involved him-self in what may be described as unethical practices, holding the entire institution to ransom.
“Normally it is the shareholders who are supposed to do what the CBN has done. But Oba Otudeko almost literally has the shareholders in his pocket. That is why an independent and powerful institution, like the CBN, to weigh in with the measures. The measures are welcome.”
On his part, an economist and former banker, Tope Fasua, noted:
“The Central Bank of Nigeria retains the right as a regulator to maintain its oversight on all banks under its jurisdiction, and since it receives and examines the books and transactions of all banks, it alone can make a judgment call on whether a bank’s directors have done the right thing.
“In the communication we have seen in the public space, the Central Bank has emphasized the fact that it has given First Bank some regulatory forbearance more than once, and that it has had to help the liquidity position of the erstwhile biggest bank in Nigeria on a number of occasions. I wouldn’t understand how a bank ignores such weighty warnings.
“The CBN went further to detail some of the insider lending of First Bank, especially as it relates to the Chairman of its holding company – Otunba Oba Otudeko. One of them is for circa N75 billion which should be beyond the single-obligor limit especially for a director of the bank or its Holdco.
“A study of the First Bank’s books reveals that the bank may have provisioned over N1 trillion in the last six years for bad loans! With these kinds of numbers, no director of the bank has any moral grounds to pontificate.”
Meanwhile, First Bank has, in a corporate statement on the new board constitution released on Friday, confirmed that all the changes made by the apex bank have been effected
“Dr. Adesola Adeduntan has since resumed work as CEO in line with the directives of the CBN”, the lender stated.
“We can confirm that the bank is cooperating with the Central Bank of Nigeria and other regulators while the operations of the bank are not hampered or hindered in any way and are in fact running smoothly.”
Both Oba Otudeko and Mrs Awosika could not be reached for their reactions as at press time. On her part however, Mrs Awosika had released a statement, affirming that she had done no wrong.
‘’As a Board, we acted in what we clearly believed to be in the best interest of the bank and we had great plans and aspirations for where the bank could go to in its future, building on all the works that has already been done in the last five plus years. Without a shadow of doubt, I will unequivocally state that I have always acted in honor and integrity with the utmost interest of the institution, all our stakeholders and the Nation’’, said Awosika.
Also denying the accusations by the CBN, Honeywell which owned by Oba Otudeko in a press statement said its business relationship with First Bank has always been professional and at arm’s length and in accordance with regulatory and industry practices and norms.
The credit facilities which we have accessed from First Bank and indeed other banks were granted after due negotiations, with the necessary documentation and in line with regulatory policies and industry standards. We have serviced all our credit facilities in line with the terms agreed with First Bank and at no point have any of these facilities been non-performing’’, Honeywell said.
Honeywell added, “In 2015, First Bank under the directive our attention to a 2004 circular (BSD/9/2004) which requires that insider related facilities must not exceed 10% of paid -up share capital. Based on this directive we subsequently entered negotiations with First Bank to agree on appropriate repayment structure and the final negotiation position was duly approved by the CBN. It is important to note that from the inception of the facilities and to-date, the facilities have been performing”.
These claims notwithstanding, the apex bank’s revelation that FirstBank had been under a regime of forbearance since 2016 and was burdened with problems of recovering insider-related loans was instructive. Industry watchers recall that NPL in First Bank which dropped from 9.90% in 2019 to 7.70% in 2020 had peaked at 17% in 2014 and stood at 25.9% in Q4 2018. However, the CBN has expressed confidence in the Adeduntan’s leadership which gives hope to shareholders of the legacy bank.