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First Bank Saga: Why CBN wielded the big stick
Tue, 4 May 2021   ||   Nigeria,

With the recent events of last week involving First Bank Nigeria Plc, (FBN), and the Central Bank of Nigeria, (CBN), several underlying issues have unfolded quickly which bring into limelight the reason for the sack of the bank’s MD/CEO, Dr. Adesola Adeduntan, and his reinstatement by CBN.

The banking windowpanes of FBN appear clear behind dusty operational curtains. The revelation by Nigeria';;;s Central Bank Governor, Mr. Godwin Emefiele that First Bank had been under a regime of forbearance since 2016 and was interspersed with problems of recovering insider-related loans was an admission of regulatory fogginess.

Behind the glittering look of the bank, the battle of supremacy was unfolding to uncover insider loan and other malpractices. Findings revealed that the plot to oust Adeduntan was led by factions in First Bank Holdings (FBNH) led by Dr. Oba Otudeko and the former Chairman of the First Bank Ibukun Awosika.

Trouble started brewing when the bank received a letter of reprimand from the Central Bank of Nigeria, (CBN), over its failure to divest its interest in Bharti Airtel Nigeria Ltd and Honeywell Flour Mills. “Despite several regulatory reminders” by the Apex Bank. These loans are all connected to the Chairman of the bank, Oba Otudeko. The letter also mandated First Bank to ensure that Honeywell repays its obligation within 48 hours while the Apex Bank threaten to “take appropriate regulatory measures against the insider borrower and the bank” if the regulatory directives are not met.

The letter from the CBN did not go down well with Otudeko leading to the decision to remove Adeduntan in a retaliation move since he believed Adeduntan has been the ‘eyes’ of the CBN in FBN.

“For years, Adeduntan has been a major leverage for the Apex Bank who relies on him to implement some of the initiatives approved by the CBN for the restructuring of First Bank. He was also considered a checkmate for Oba Otudeko whom the CBN believes was a major reason for the spate of bad loans in the bank over the years.

This has been a major source of conflict between the CBN and Oba Otudeko.

Hence, the premature removal of Adeduntan as the MD/CEO is seen as an attempt by Otudeko, Awosika and their faction to ensure the CBN’s regulatory letter is not implemented, as Adeduntan is seen as the Apex bank’s watchdog in First Bank.

Godwin Emefiele, the CBN governor at the press briefing where he disclosed the sack of Awosika and Otudeko, said the Apex bank had granted “regulatory forbearances to enable First bank to work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years.”

Otudeko is said to be one of the beneficiaries of these insider loans who needs to be tamed before First Bank is declared insolvent.

Oba Otudeko who was the major target of this debacle is believed to have obtained billions of unpaid loans in First Bank and had to be controlled by the CBN through Adeduntan,

Emefiele also pointed out in his media briefing that the inside loanees failed to comply with restructuring terms of their credit facilities, putting First Bank in a bad financial state.

“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 3 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 said.

The CBN Governor went further to detail some of the insider lendings of First Bank, especially as it relates to the former Chairman of its holding company – Otunba Oba Otudeko. One of them is for about N75 billion which should be “beyond the single-obligor limit especially for a director of the bank or its Holding Company”.

The same Otudeko also owes Ecobank some N5.5 billion, a loan which is the subject of litigation at the Supreme Court at present. The CBN has asked for an immediate paydown of the First Bank loan within 48 hours. Both loans from First Bank and Ecobank have been allegedly secured with Otudeko’s shares in Airtel, which the CBN alleges have not been put in a perfectible state and hence cannot really serve as a fall back for either of the banks.

Central Bank Governor Emefiele added that he struggled to salvage the situation through a less severe means by reaching out personally to the man at the centre of the fiasco, Oba Otudeko.

According to him, he called Otudeko a few times, and got disregarded or snubbed. He also reached out to him through other directors of the bank without any response. Thus, Otudeko and other directors took CBN warnings with levity forgetting the fact that the Apex Bank as a regulator can make or mar a financial institution.

It remains unclear how the camp of Oba Otudeko will react to their removal as directors of First Bank especially with the burden of having to repay his indebtedness to the bank. The CBN’s 48 hours mandate to repay the loans has since expired on the 29th of April. His option will likely be to proceed to the court to get an injunction against the CBN.

This leaves a lot of questions begging for answers, questions like: Do you owe the bank? Have you been servicing the loan? Is the loan well collaterised?  Why should you get a loan from a bank that you chair and not service the same loan? Why did you ignore earlier warning letters about the loan and your relationship with the bank?

Will Oba Otudeko be able to untangle himself from these heavy allegations? Plus the integrity test, this development has exposed both Otudeko and the banking sector too. Only time will tell.


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