As a First Bank shareholder, I have been concerned for the health of the elephant. Recent events have not been encouraging – and things just keep evolving. But it has moved to another level now. People, the Central Bank of Nigeria has sacked the board of First Bank and its holding company, over  “ bad credit decisions, significant and non-performing insider loans and poor corporate governance practices. The shareholders of the bank and FBN Holding Plc also lacked the capacity to recapitalize the bank to minimum requirements. This conclusions arose from various entreaties by the CBN to them to recapitalize”.

And stunningly, the bank reinstated Adebola Adeduntan as the GMD/CEO, a day after he was removed by the board. Notice that Ibukun Awosika, the former Chairman of First Bank board, has been cut; she initiated the huge change that has triggered the recent upheavals.

First Bank of Nigeria Limited has appointed Gbenga Shobo as its managing director/chief executive officer effective from April 28.

Mr Shobo, who until now was the lender’s deputy managing director, will take over leadership from Adesola Adeduntan, who will be retiring in accordance with the bank’s term limits for chief executives, having headed it since 2016.

“His appointment has proven the resilience of our succession planning mechanisms and the value we place on our long-standing corporate governance practices, which underpin the institution’s enduring sustainability and 127-year legacy,” Ibukun Awosika, chair of the bank’s board of directors, said Wednesday in a statement reported by The Cable.

The apex bank needs to listen to my old proposal: ban bank directors and their associated companies to ever borrow from banks they supervise while actively serving. My non-academic data shows that 90% of all bank problems in Nigeria are related to insider-deals, typically coming from loans given to directors and their cohorts. Because our managers are yes people, those things happen. These loans always underperform.

The Central Bank of Nigeria has directed the Oba Otudeko owned Honeywell Flour Mills to repay a loan to First Bank within 48 hours, according to a memo seen by TechCabal.

In the letter seen by TechCabal dated April 26, 2021, the CBN stated, “Consequently, the company (Honeywell Flour Mills) is required to fully repay its obligations to the bank within 48 hours, failing which the CBN will take appropriate regulatory measures against the insider borrower and the bank.”

Insider lending is when a bank makes a loan to one or more of its own officers or directors.

Oba Otudeko serves as the chairman of FBN Holdings PLC, the holding company which owns First Bank. Otudeko also served as Chairman of First Bank until 2010 and is also the Chairman of the Honeywell Group.

While insider borrowing is legal, it is subject to several regulations. One such regulation is that insiders do not get any special treatment, incentive rates, or other benefits not offered to regular bank customers.

I find it repulsive when AMCON takes poor people’s commonwealth to bailout “fake billionaires” who continue to live large. My solution would be: you cannot borrow from a bank while on its board. Do that, and Nigeria will solve most of these issues!

Can we make it illegal for bank directors to borrow from banks they actively supervise?

The full statement by Emefiele below…

1.0 Good afternoon ladies and gentlemen.

2.0 The media has been awash with commentaries on the purported management changes at First Bank of Nigeria Ltd (FBN) and the related regulatory inquiry by the Central Bank of Nigeria (CBN) to the Board of First Bank of Nigeria Limited. It has therefore become necessary for me to address the public to clear any misconceptions.

3.0 Ordinarily the board is vested with the authority to make changes in the management team subject to CBN approval. However, the CBN considers itself a key stakeholder in management changes involving FBN due to the forbearances and close monitoring by the Bank over the last 5 years aimed at stemming the slide in the going concern status of the bank. It was therefore surprising for the CBN to learn through media reports that the board of directors of FBN, 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 FBN sends 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 queried the board of directors on the unfortunate developments at the bank.

4.0 As you may be aware, FBN is one of the systemically important banks in the Nigerian banking sector given its historical significance, balance sheet size, large customer base and high level of interconnectedness with other financial service providers, amongst others. By our last assessment, FBN has over 31m customers, with deposit base of N4.2trn, shareholders’ funds of N618bn and NIBSS instant payment (NIP) processing capacity of 22% 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, also important, is the protection of the over 31m customers of the bank who see FBN as a safe haven for their hard-earned savings.

5.0 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.

6.0 The problems at the bank were attributed to bad credit decisions, significant and non-performing insider loans and poor corporate governance practices. The shareholders of the bank and FBN Holding Plc also lacked the capacity to recapitalize the bank to minimum requirements. This conclusions arose from various entreaties by the CBN to them to recapitalize.

7.0 The CBN stepped in to stabilize the bank in its quest to maintain financial stability, especially given FBN’s systemic importance as enumerated earlier. Regulatory action taken by the CBN in this regard included:

i. Change of management team under the CBN’s supervision with the appointment of a new Managing Director/ Chief Executive Office in January 2016.

ii. Grant of the regulatory forbearances to enable the bank work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years.

iii. Grant of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions

iv. Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures

8.0 The measures had yielded the expected results as the financial condition of FBN improved progressively between 2016 when the forbearance was initially granted to the current financial year. For instance, profitability, liquidity and CAR improved whilst NPL reduced significantly.

9.0 Notwithstanding the significant improvement in the bank’s financial condition with positive trajectory of financial soundness indicators, the insider related facilities remained problematic.

10.0 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

11.0 Following further review of the situation and in order to preserve stability of the bank, so as to protect minority shareholders and depositors, the Management of the CBN in line with its powers under BOFIA 2020 has approved and hereby directs:

i. Immediate removal of the all directors of FBN Ltd and FBN Holdings Plc

ii. The appointment of the following persons as directors in FBN Ltd and FBN Holdings Plc

Holdco

1. Chairman – Remi Babalola

2. Dr. Fatade Abiodun Oluwole

3. Kofo Dosekun

4. Remi Lasaki

5. Dr Alimi Abdulrasaq

6. Ahmed Modibbo

7. Khalifa Imam

8. Sir Peter Aliogo

9. UK Eke – Managing Director

Bank

1. Chairman – Tunde Hassan-Odukale

2. Tokunbo Martins

3. Uche Nwokedi

4. Adekunle Sonola

5. Isioma Ogodazi

6. Ebenezer Olufowose

7. Ishaya Elijah B. Dodo

8. Sola Adeduntan – Managing Director

9. Gbenga Shobo – Deputy Managing Director

10. Remi Oni – Executive Director

11. Abdullahi Ibrahim – Executive Director

12.0 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.

“Since I became the CBN governor, I have been hearing about the size of diaspora remittances; some say $20 billion, in fact some say it’s about $30 billion. Honestly, I have been looking for the $30 billion or $20 billion, I have not seen it.

“But this time, I have decided that I will focus to see those billions of dollars. You know what, I am not only expecting $20 billion, if we get even up to $10 billion to $15 billion, I can tell you it can help the Nigerian economy.

“Pakistan, Indonesia and others generate an average of $2 billion monthly in diaspora remittances and this has helped to reduce the impact of COVID-19 on their economy,” Central Bank of Nigeria Governor, Godwin Emefiele (source).

Then, “the CBN Governor, Godwin Emefiele, recently said that weekly diaspora remittances rose from $5m to $30m. He noted that the initiatives introduced by the CBN to boost foreign exchange in the country were yielding results.” Yet, the numbers are way off the soundbites. At that rate, you get less than $2 billion in a year.

So, where is the extra $18 billion? They are there: peer to peer remittance; the official traditional remittance channels are being disintermediated. CBN’s problem is not Nigeria but US tax systems which make peer-to-peer preferable. Try to remit $10,000 from the US to Nigeria. You will share your social security number and practically everything about your life.

Next time, the same person may just prefer to wire that money to somebody in the US who will credit him in Nigeria. With that, no remittance in CBN books but remittance has actually taken place.  To fix remittance, it is what happens in Nigeria that matters to the diasporas, it is what they have to prove before that money lives US when the amount is significant.

Amidst Surge in P2P Cryptocurrency Transactions, CBN Licenses 10 More IMTOs to Boost Diaspora Remittance

As Nigeria’s economy spirals quarter-on-quarter into deeper dismay, the Central Bank of Nigeria (CBN) has been trying many policies to stop the plunge. The CBN has granted operating licenses to 10 additional international money transfer operators (IMTOs) as part of efforts to boost diaspora remittances.

In March, the Apex bank introduced the ‘Naira 4 Dollar Scheme’ for diaspora remittances, which offers recipients of diaspora remittances through CBN’s International Money Transfer Operators, N5 for every $1 received as remittance inflow.

“In an effort to sustain the encouraging increase in inflows of diaspora remittances into the country, the Central Bank of Nigeria (CBN) hereby announces the introduction of the “CBN Naira 4 Dollar Scheme”, an incentive for senders and recipients of international Money Transfers,” a circular shared by the CBN said.

“Accordingly, all recipients of diaspora remittances through CBN licensed IMTOs shall henceforth be paid N5 for every USD1 received as remittance inflow,” it added.

The move was geared towards taking pressure off the naira by boosting dollar liquidity in Nigeria as most of the diaspora remittances shifted to cryptocurrency channels, compounding the country’s forex instability. It’s a two-month trial that will end next month but may be extended if successful.

Well over a month after the scheme started, it is yet to effect significant change in Nigeria’s economy. And now, the CBN governor Godwin Emefiele wants to expand the number of IMTOs in the country in the hope of achieving its aim as the trial deadline nears.

He said if the country could have inflows of about $10 billion to $15 billion, it would have a significant effect on the economy amidst the current fiscal constraints.

The newly-licensed operators are Transfercorp Limited/VFD Group; Comot Trading Nigeria Limited; Direkt Wire UK Limited; Gabtrans UK Limited in partnership with Moneyto Limited; GDM Transfer PTY Limited; Innovate 1 Pay Limited; Paysend Plc; SANAA Capital LLC (Money4 Diaspora Services LLC); Swift Payment Limited and WI-PAY Global LLC.

The new additions bring the total number of IMTOs in Nigeria to 57, as the CBN restricts all diaspora remittances to deposit money banks rather than mortgage or fintech institutions.

This move is to accommodate anticipated wider dollar inflow to Nigeria, even though there is no sign diaspora remittance is breaking away from the shackles of cryptocurrency. Although cryptocurrency trading volume has declined in the first quarter of the year compared to the last quarter of 2020 when it hit a record $400 million, there has been a surge in peer-to-peer (P2P) trade volumes.

Recent data from UsefulTulips shows that Nigeria still dominates the African cryptocurrency market, despite the central bank’s ban that forced dealers to P2P late last year. Nigeria’s P2P bitcoin traded volumes in the past 90 days surged to nearly $100 million, indicating that the central bank has been defied by still a huge number of diasporans who have chosen cryptocurrency as their means of remittance.

The CBN is counting on the diaspora remittance to stabilize cashflow as government’s revenue generation plunges further.

Emefiele said the remittances would help to curb the strains of COVID-19 just as in other countries like Pakistan and Indonesia.

“Since I became the CBN governor, I have been hearing about the size of diaspora remittances; some say $20 billion, in fact some say it’s about $30 billion. Honestly, I have been looking for the $30 billion or $20 billion, I have not seen it.

“But this time, I have decided that I will focus to see those billions of dollars. You know what, I am not only expecting $20 billion, if we get even up to $10 billion to $15 billion, I can tell you it can help the Nigerian economy.

“Pakistan, Indonesia and others generate an average of $2 billion monthly in diaspora remittances and this has helped to reduce the impact of COVID-19 on their economy,” he said.

While these targeted efforts are feasible, market frictions driving cryptocurrency surge are still at large, expanding its scope of authority to stymie CBN’s moves. Cross-border bureaucratic bottlenecks and intermediary costs of making remittances through regulated traditional financial institutions, are inadvertently pushing increasing crowd of people to cryptocurrency.

This was acknowledged by the Association of Bureau De Change Operators of Nigeria (ABCON), which stated that cryptocurrency transactions have an edge over the counter-remittance measures being introduced by the CBN.

“These exchanges override the political complications of official channels. The global reach of cryptocurrencies avoids the inflation risk inherent to official currencies, especially in politically unstable countries reliant on fickle foreign investors,” ABCON said.

With this trajectory, the CBN will need more than the ‘Naira 4 Dollar Scheme’ to save the naira from the oppression of cryptocurrency.

It is always a privilege to be called to speak before legends. On  Tuesday 18th May 2021, I will deliver a presentation before the CEOs who make Nigeria run. Yes, members of the Manufacturers Association of Nigeria (MAN). If the oil & gas sector is the high priest to our foreign exchange, MAN and its members hold the economic vitality of Nigeria.

Irrespective of any financial engineering in Nigeria at any level (central bank, commercial bank, finance ministry), the best friend Naira can have is MAN because only MAN holds the long-term sustainability of Naira.

I expect it to be a great conversation with men and women who MAKE things.