It prides itself as not just the first but the biggest commercial bank, not just in Nigeria but indeed in West Africa. And it may have a point. First Bank Nigeria Limited has well over 700 business outlets across Africa; employed the largest number of staffers put at over 16, 000, has over 31 million customers and the third-largest shareholders funds in the country.
All these may, however, be in the past as the big elephant has been engulfed in a crisis of unimaginable proportion. What started with a seemingly innocuous press release soon snowballed into a revelation of cankerworm of insider abuse and disdain for corporate governance structure. The former chairman of the Board of Directors, Mrs Ibukun Awosika, had on 28 April 2021, via a press statement, approved the appointment of Mr Gbenga Shobo, as the new Chief Executive Officer/Managing Director of the bank. He was to succeed Mr Adesola Adeduntan, who has been at the helm of affairs since 2016 and whose tenure is expected to end later this year.
This new appointment reportedly didn’t go down well with the Central Bank of Nigeria (CBN), the regulatory body for all banks in the country. It quickly demanded an explanation from the bank, alleging that the dismissal of Adeduntan and new appointments to the board of the bank was done without its knowledge.
A source told Rulers’ World that the CBN, in fact, wrote to the board of the bank and its parent company, FBN Holdings Plc, headed by Mr Oba Otudeko, to rescind the decision and reinstate Adeduntan, a request that was rejected.
Determined not to fold its arms and allow things to degenerate thereby causing anxiety in the banking sector, the CBN promptly wielded the big stick dissolving the two boards with immediate effect. The CBN Governor, Mr Godwin Emefiele, while addressing journalists at a press conference in Abuja, announced the reinstatement of Adeduntan.
According to him, the apex bank took the actions in order to preserve the stability of the bank and protect minority shareholders and depositors, saying, “We will not allow a shareholder who feels he will not subject himself to regulatory control and authority to remain as a director of the bank.”
CBN also announced the appointment of a former Minister of State for Finance, Mr Remi Babalola, as a replacement for Otudeko as Chairman, FBN Holdings.
Otudeko was Chairman of First Bank for 12 years before assuming the position of Chairman, FBN Holdings Plc.
The CBN also in the sweeping changes appointed other new directors on the FBN Holdings’ board, including Fatade Oluwole; Kofo Dosekun; Remi Lasaki; Alimi Abdulrasaq; Ahmed Modibbo; Khalifa Imam and Peter Aliogo. Mr U.K. Eke however retains his position as Managing Director of FBN Holdings.
For First Bank, it now has Tunde Hassan-Odukale as Chairman. Other board members are Tokunbo Martins; Uche Nwokedi; Adekunle Sonola; Isioma Ogodazi; Ebenezer Olufowose; Ishaya Elijah B. Dodo and Adeduntan.
Gbenga Shobo, Deputy Managing Director and Remi Oni and Abdullahi Ibrahim, Executive Directors, are members of the new board.
While describing First Bank as one of the systemically important banks in the banking sector given its historical significance, balance sheet size, large customer base and high level of interconnectedness with other financial service providers, among others, Emefiele assured depositors, creditors and other stakeholders of the commitment of the CBN to safeguard the bank.
According to him, “The CBN hereby reassures the depositors, creditors and other stakeholders of the bank of its commitment to ensure the stability of the financial system. There is, therefore, no cause for panic amongst the banking public, given that the actions being taken are meant to strengthen the bank and position it as a banking industry giant.
“By our last assessment, First Bank has over 31 million customers, with a deposit base of N42 trillion, shareholders’ funds of N618 billion and NIBSS Instant Payment (NIP) processing capacity of 22 per cent of the industry.
“To us at the CBN, not only is it imperative to protect the minority shareholders that have no voice to air their views, but also important is the protection of the over 31 million customers of the bank who see First Bank as a safe haven for their hard-earned savings.
“The bank maintained healthy operations up until 2016 financial year when the CBN’s target examination revealed 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.”
Though the crisis may have been laid to rest following the intervention of the CBN, Rulers’ World however can authoritatively report that it blew open ab initio as a result of tussle for control of the bank between a bloc led by Otudeko and Otunba Mike Adenuga, Chairman, Globacom, who also holds majority stakes in Conoil and Sterling Bank. He recently emerged as one of the biggest shareholders in the bank following his take-over of late Alao Arisekola’s shares in the bank. Insiders believed that while Otudeko and Awosika are seen as allies and working for the same interest, Adeduntan, on the other hand, represented the interest of a late Ibadan business mogul and prominent shareholder, Alhaji Abdul Azeez Alao Arisekola.
It was learnt that the 51-year-old Adeduntan is viewed by the Otudeko bloc as serving the interest of Adenuga, who recently took over the significant shares of Alao Arisekola. Alao Arisekola died in 2014.
It would be recalled that Adeduntan was appointed Managing Director of the bank in 2016 to help it regain a sound financial footing after an avalanche of bad loans threatened to sweep it under. Sources said its bad loan charges had ballooned by almost four times from N25.942 billion to N119.322 billion between 2014 and 2015. The figure would soar further in the next twelve months, although at a slower pace this time, by 90 per cent to N226.037 billion, taking its delinquent loan to 24 per cent of its entire credit portfolio, well above the five per cent permitted by the CBN.
The intervention of the CBN in the crisis, aimed at salvaging the bank from a “grave financial condition”, however meant N150 billion was written off in bad loans after shareholders failed to recapitalize the bank amid capital adequacy concerns.
The situation was to turn worst following a N75 billion loan facility by First Bank to Honeywell Flour Mills, in which Otudeko owns a majority stake. Though the annual or interim reports of Honeywell Flour Mills did not reveal the total amount the company owed First Bank, our source revealed that Honeywell’s current portion of its loan to First Bank is N13.5 billion, including the overdraft facility of N2.9 billion. However, CBN alleged that First Bank gave special treatment to Honeywell Flour Mills by restructuring its loan facility and might not have performed its due diligence in securing the collateral for the credit facility.
CBN had therefore expressed concerns over the issuance of such insider loan to the company when it got wind of it because the insider lending in the first instance was beyond the single-obligor limit particularly for a director which called the bank’s corporate governance to question. CBN had further said, First Bank non-performing loans, when compared with its Capital Adequacy Ratio (CAR), was beyond acceptable standards since 2016. CAR is the measure of the capital that banks have to protect customers’ deposits. When it is less than non-performing loans, it means that the bank’s liabilities are greater than its assets.
However, Honeywell Flour Mills, in a statement issued after this became public knowledge, said the loan has performed from inception till date, and in accordance with agreed terms, stating that the facilities were adequately secured with collaterals at over 170 per cent of Forced Sales Value and 230 per cent at Open Market Value.
But the CBN was to counter this, disclosing that the bank failed to perfect its lien on Otudeko’s shares in First Bank, which were placed as collateral for the loan. A lien ensures the creditor (First Bank in this case) obtains the right to the property (Mr Otudeko’s shares) if the borrower (Honeywell Flour Mills) fails to meet its debt repayment obligations.
“We further noted that after four years, the bank is yet to perfect its lien on the shares of Mr Oba Otudeko in FBN Holdings 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 CBN said.
The apex bank has then called in Honeywell Flour Mill’s loan, warning that if the company is unable to pay up, Otudeko may lose his shares in the bank.
Apart from desecrating corporate governance principles, the CBN had chided FBN Board for engaging in such unhealthy lending as there were no legal/binding documents signed between the two parties regarding the collateral which will allow First Bank to claim the shares of Otudeko in FBN Holdings, should the loanee fails to repay the loan.
In another report, Otudeko’s Airtel shares were said to have been used as collateral for Honeywell’s Ecobank loan of N5.5 billion naira which he took in 2013 and Otudeko again used the same Airtel shares as well as some Honeywell assets to secure credit facility from First Bank which again amounts to a disregard for corporate governance.
CBN had therefore asked First Bank to divest its interests in Honeywell Flour Mills Group and Bharti Airtel Nigeria Ltd because the Airtel shares were part of the collateral Otudeko had used to get the Ecobank loan.
Otudeko’s unethical practice to protect selfish ambition got the FBN board into the mess that has become public knowledge. Before the internal squabbles came to a head, the Board had grappled with a high-stake issue that had drawn manoeuvering, tension and power play among its board members over ethical breaches which eventually led to the sacking of the Managing Director, Dr. Sola Adeduntan by the then Board.
Meanwhile, it was learnt that Adenuga has been stepping up efforts to buy the shares pledged as security for the loan. It was also gathered that Adeduntan had demonstrated his willingness to oblige the CBN’s demand to perfect the collateral, a decision that may likely favour Adenuga and hand him majority control of the bank.
According to the bank’s 2020 report, Otudeko and his allies currently hold 1.5 per cent of the bank’s shares while Oye Hassan-Odukale holds 1.03 per cent.
Rulers’ World gathered that Adenuga is trying to forge an alliance with Hassan-Odukale to oust Otudeko as the bank’s majority shareholder. It was also learnt that there had been plans by top rank members of the bank to either write off the N75 billion or restructure it to give the debtor some relief with the issue dividing the management into pro-Otudeko and anti-Otudeko groups.
It was further gathered that those backing Otudeko seemed to be stronger and had pushed for the removal of Adeduntan.
While speaking on the development, the Chief Executive Officer, Global Analytics Company, Mr Tope Fasua, said the situation was avoidable and regretted that it was not nipped in the bud by the former board.
According to him, “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 a weighty warning. The CBN went further to detail some of the insider lendings of First Bank, especially as it relates to the Chairman of its holding company, Otunba Oba Otudeko.
“Some of the people on the side of the now-dismissed board have alleged all sorts. The most ridiculous is that the CBN is after First Bank for supporting Flutterwave, which also supported EndSARS. Everything has become politicised in Nigeria.
“With the move from the CBN, we pray First Bank finds some peace. But more generally, we hope that our smart people who run banks will understand the sheer enormity of the licences they owe and never get into their heads to throw it all away in some flight of fancy.”
On his part, a financial analyst, Mr. Kunle Ogundoro, lamented that the elites in the country have continued to play chess game with the lives of Nigerians, stating that whenever they fight themselves it is not about the people but individual interest.
“The recent development at the First Bank is quite unfortunate; it was all about self-interest among the major shareholders and self-preservation. The elites in the country would go to any length to outmanoeuvre each other. Too bad for our country.”
Otudeko is not a minion in boardroom matters as he had chaired the Board of a number of blue-chip organisations which include Fan Milk Nigeria Limited and Airtel Nigeria. One wonders how a supposed Boardroom guru of his standing would desecrate corporate governance principles to such an extent.
Prior to CBN’s sack of the board of FBN Limited and FBN Holdings, it had directed First Bank to recover the loan it had granted to Honeywell Nigeria Plc, or face appropriate regulatory measures for insider borrowing.
Our source leant that Remi Babalola was considered as the best replacement for Otudeko because he was once a member of the board of First Bank and he understands the dynamics of the operation of FBN. Given Babalola’s key competencies in capital raising, credit analysis, mergers and acquisitions, alternative investment, auditing and strategy, a skillset analyst, FBN is in dire need of his professional competence to return it to a sound and healthy institution.