The Governor of Central Bank of Nigeria, CBN, Mr. Godwin Emefiele has revealed how boardroom guru and major shareholder with the First Bank Nigeria Limited, Dr. Obafoluke Otudeko spurned his calls and pleas not to interfere with the running of the bank by engineering the removal of its managing director/Chief Executive Officer, Dr. Adesola Adeduntan.
According to the CBN Governor, Otudeko, a major shareholder controlling about 10 percent of First Bank, rebuffed his calls and also refused to pick the calls of 2 other major shareholders of the Bank, sought to intervene.
“I spoke to Mr. Oba Otudeko, he refused to grant my request. I had to call two of his fellow major shareholders to call him to ask the board not to take such decisions without the approval of the CBN. He refused to pick the calls of these shareholders — who are also owners of the bank,” Emefiele said at a live broadcast Thursday to announce the sacking of the boards of First Bank Nigeria Limited and FBN Holdings Limited.
“I called him the second time, I heard on another phone one of the shareholders begging him not to take that decision, he insisted on taking that decision. I sent the shareholder back to the office of Mr. Oba Otudeko to appeal to him to suspend the decision, he refused to see the shareholder. I feel we have done our best and we would not allow a shareholder who cannot subject himself to regulatory control and authority to remain as the director of a bank.”
FBN Holdings is one of the systemically important bank in Nigeria, given its historical significance having been established in 1894, large customer base and high interconnectedness with other financial service providers.
First Bank has over 31 million customers, deposit base of over N4.2 trillion, shareholder funds N618 billion and NIBBS instant payment processing capacity of 22 percent of the industry.
The need to protect these over 31 million customers of First Bank and its minority shareholders are some of the reasons why the CBN moved to oust the former boards of the First Bank and its holding company.
“The CBN considers itself a key stakeholder in management changes involving First Bank of Nigeria, due to the forbearances and close monitoring by the bank over the past 5 years aimed at stemming the slide in the growing concern status of First Bank,” Emefiele said.
Emefiele said it was surprising for the CBN to learn through media reports that the board of directors of First Bank of Nigeria limited a systemically important bank under regulatory forbearance regime had effected sweeping changes in executive management, without engagement and/or prior notice to the regulatory authorities.
The action by the board of First Bank of Nigeria sent a negative signal to the market on the stability of leadership on the board and management and it is in light of the foregoing that the CBN decided to query the board of directors on the unfortunate development at the bank, according to Emefiele.
The apex bank boss also revealed that insider related loans in the bank especially those with controlling interest on the board of Directors failed to adhere to the terms of restructuring of their credit facilities, which contributed to the poor financial state of the bank.
“The CBN’s recent target examination as at December 31st 2020 revealed that insider loans were materially non-compliant with terms of restructure of the loans,” Emefiele said.
“For example non perfection on liens on shares and collateral arrangements that CBN had insisted on for over 3 years, despite several regulatory reminders. The bank has also not divested its non-permissible holdings in non-financial entities in line with regulatory directives.”
The CBN in a letter to Mrs Ibukun Awosika, the former Chairman of the Bank dated April 26, 2021, said the bank had not complied with regulatory directives to divest its interest in Honeywell Flour Mills despite several reminders.
The bank had also not perfected its lien on the shares of Otudeko in FBN Holdco which collaterised the restructured credit facilities for Honeywell Flour Mills contrary to conditions precedent for the restructuring of the company’s credit facility.
The bank had also failed to divest its equity investments from its holdings in Bharti Airtel Nigeria in line with extant regulations.
Otudeko is the Chairman of FBN Holdings, the holding company of First Bank Nigeria Limited. He is also the Chairman of Honeywell Group while he used to be the Chairman of Barti Airtel.
However, the CBN in a letter stated: “Given the bank’s failure to perfect the pledge and satisfy conditions for regulatory approval, the restructuring has thus been invalidated and the credit facilities now payable immediately.”
Consequently, the CBN has requested that Honeywell Flour Mill “fully repays its obligations to the bank within 48 hours failing which the CBN will take appropriate regulatory measures against the insider borrower and the bank.”
It added: “Furthermore, the Bank notes the untenable delay in resolving the long outstanding divestment from Bharti Airtel Nigeria Ltd in line with extant regulations of the CBN.
“Accordingly, you are required to divest the equity investments in all non-permissible entities such as Honeywell Flour Mills and Bharti Airtel Nigeria Limited within 90 days. Please you are to forward evidence of compliance in accordance with the timelines above to the Director of Banking Supervision.”
However, this CBN intervention may have a substantial impact on the share price of First Bank Holdings as stock market traders expect a double-digit dip as the opening bell commences.
Part of the concerns raised by the CBN was the issue of loans procured by favouritism, which failed to adhere to the terms for the restructuring of their credit facilities.
FBN Holdings closed with a loss of -6.6%, placing it at the third position in the NSE ASI for Thursday.
Meanwhile, analysts have opined that the CBN announcement may trigger an AMCON takeover of Honeywell Nigeria Plc if Otudeko fails to repay his loans.
Shares of Honeywell Flour Mills, a consumer goods company owned by Oba Otudeko fell 3.76% on Thursday and could fall further by Friday when the market reopens as investors digest the impact of the CBN’s announcement and what this could mean for the survival of Honeywell.