The Central Bank of Nigeria (CBN) has dissolved the board of directors of First Bank Holdings (FBNH)* and First Bank of Nigeria (FBN) on April 29. It cited insider abuse and the breakdown of corporate governance as the reasons behind the move.
This has led to the expulsion of Obafoluke Otudeko, the largest shareholder and chairman of FBNH, and Ibukun Awosika, the chairman of FBN.
The CBN’s decision to remove Otudeko and the bank’s other directors is further linked to its regulatory forbearance and support in its corporate restructuring to protect it from falling. The apex bank said it had supervised the bank’s activities for five to six years to ensure that it would not collapse.
Nairametrics reported recently that Godwin Emefiele, the governor of the CBN, revealed to the press that it had granted “regulatory forbearances to enable the bank to work out its non-performing loans through provision for write-off of at least N150 billion from its earning for four consecutive years.” The report noted that FBNH recorded a total loan impairment of more than N565 billion ($1.5 billion) between 2016 and 2020.
Moreso and FBN did not submit a comprehensive legal document with the CBN to help it claim the bank’s collateral from Otudeko’s Honeywell Flour Mills.
In a memo sent to Awosika, the apex bank said that “after four years the bank is yet to perfect its lien on the shares of Mr. Oba Otudeko in FBN Holdco, which collateralized the restructured credit facilities for Honeywell Flour Mills contrary to the conditions precedent for the restructuring of the company’s credit facility.”
The regulator voiced concern for FBN’s lack of adherence to comply with regulatory directives to divest FBN’s interests in Honeywell Flour Mills despite several reminders.
These issues prompted the CBN to instruct Honeywell Flour Mills to repay its loan to FBN within 48 hours, which elapsed on April 28. Accordingly, it directed the FBN to “divest the equity investments in all non-permissible entities such as Honeywell Flour Mills and Bharti Airtel Nigeria Ltd within 90 days.” Otudeko also owns a significant stake in Bharti Airtel Nigeria Ltd.
Otudeko is a Nigerian tycoon and the founder and chairman of the Honeywell Group. Before becoming the chairman of FBNH, he was on the board of FBN for 12 years before retiring as chairman in 2010.
The precursor to this event
The expulsion of the chairmen follows recent activities within the company’s board of directors that saw the premature removal from office of FBN Managing Director and CEO Adesola Adeduntan.
The CBN has been using Adeduntan as a check against attempts by the directors of FBN to secure insider loans, according to Nairametrics.
However, the CBN reinstated Adeduntan as the bank’s managing director and CEO on April 29. The apex bank has also set up an Interim Board of Executives for the bank to be chaired by Tunde Hassan-Odukale, the Guardian reported. Other members include Tokunbo Martins, Uche Nwokedi, Adekunle Sonola, Isioma Ogodazi, Ebenezer Olufowose, Ishaya Elijah Dodo, Gbenga Shobo, Remi Oni and Abdullahi Ibrahim.
*FBN Holdings is the parent company of FBN.**Regulatory Forbearance is a policy implemented by a country’s central bank or other regulatory authorities to allow banks and financial institutions to continue operating even when their capital is fully depleted. Regulators give banks extended periods during which they have to comply with regulatory requirements.