A bank run has started at First Bank of Nigeria (FBN) after a recent scandal concerning its board of directors and the Central Bank of Nigeria (CBN). Customers at branches around the country are withdrawing cash, fearing that the bank could shutter its doors.
The International Center for Investigative Reporting (ICIR) stated that the customers were making panic-withdrawals after a board shake-up that revealed poor corporate governance at the bank. Some of them fear that the bank could collapse, a situation with which many are familiar in Nigeria. An anonymous FBN customer told the ICIR that she withdrew her N900,000 ($2,202.1) savings from the bank amid the scandal.
The ICIR quoted the customer as saying: “I have been in this country long enough to read the writing on the wall. With the Central Bank’s intervention in the leadership of the bank, I have a serious concern that there could be a corporate misdemeanor from the managers of the bank. I have utmost respect for the bank with its long-standing legacy, however, I have to be cautious at this time.”
On April 29, the CBN dissolved the board of directors of FBN and First Bank of Nigeria Holding (FBH), citing insider abuse and the breakdown of corporate governance. This led to the expulsion of Obafoluke Otudeko, the largest shareholder at FBN and FBH, and the chairman of FBH, and Ibukun Awosika, the chairman of FBN.
Background: Nigerian bank crises
Between 1994 to 2006, approximately 45 Nigerian banks were liquidated, according to a document from the Nigeria Deposit Insurance Corporation. Many Nigerians, who could not withdraw their money on time, lost their life savings at the banks, including international footballer Austin Jay Jay Okacha. Okacha lost $1 million in the collapse of Societe Generale bank in Lagos in 2004 despite promises from then-President Olusegun Obasanjo to help retrieve his funds.
When the stock market fell 70 percent between 2008 and 2009, the CBN stepped in with a rescue plan. In a bid to save customers from losing deposits, it commenced a consolidation exercise that eventually led to the merger of some financial institutions.