The events of last week involving First Bank Nigeria Plc (FBN) escalated quickly to expose underlying issues that resulted in the sack of the bank’s MD/CEO, Dr. Adesola Adeduntan.
Behind the glittering look of the bank, the battle of supremacy was unfolding to uncover insider loan and other malpractices. A report by Nairametrics 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.
According to the report, it started when the bank received a letter of reprimand from the Central Bank of Nigeria (CBN), over its failure to divest its interest in Honeywell Flour Mills “despite several regulatory reminders” by the Apex bank.
The CBN thus mandated First Bank to ensure within 48 hours that Honeywell repays its obligation. The loans are traceable to Otudeko, and the apex bank had threatened to “take appropriate regulatory measures against the insider borrower and the bank” if the regulatory directives are not met.
“For years, the CBN has used Adeduntan as a check against attempts by directors of First Bank to secure insider loans, a major source of conflict between the CBN and Oba Otudeko,” the report said.
Thus, the premature removal of Adeduntan as the MD/CEO is seen as an attempt by Otudeko and 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.
In the press briefing where he discussed the sack of Awosika and Otudeko, CBN governor Godwin Emefiele 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 goes under administration.
“Oba Otudeko who was the major target of this fiasco is believed to have obtained billions of unpaid loans in First Bank and had to be controlled by the CBN through Adeduntan,” the report said.
Emefiele also pointed out that 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 Honeywell’s side of the story.
In light of the unfolding events, Honeywell has issued a statement to clarify its position in the saga. In a statement entitled: “Relationship Between Honeywell Group and First Bank of Nigeria,” the company said it has serviced all credit facilities in line with agreed terms with First Bank, and no point have any of these facilities been non-performing.
“Like most companies, Honeywell Group utilizes its own equity and borrows from banks and other financial institutions to carry out its operations. Partnering with local and and international financiers, we have a strong track record of mutually beneficial successes with our partners, based on honoring obligations and delivering returns to all stakeholders.
“Since 1972, Honeywell Group and First Bank of Nigeria (First Bank or the Bank) have had a professional business relationship which preceded the Group’s investment in First Bank over a decade later. Honeywell Group’s relationship with First Bank has always been professional, at arm’s length and in accordance with all regulatory and industry practices and norms. The credit facilities which we have accessed from First Bank and indeed other banks, were granted after due negotiations, with necessary documentation and line with regulatory policies and industry standards.
“We have serviced all our credit facilities in line with the terms agreed with First Bank and at no point have any of these facilities been non-performing.
“In 2015, First Bank under the directive of the Central Bank of Nigeria, drew our attention to a 2004 circular (BSD/9/2004), which requires that insider related facilities must not exceed 10% of paid-up share capital. Based on this directive we subsequently entered negotiations with the Bank to agree on appropriate repayment structure and the final negotiated position was duly approved by the CBN. It is important to note that from the inception of the facilities and to-date, the facilities have been performing.
“In accordance with agreed terms, our facilities are adequately secured with First Bank, with collaterals in place at over 170% of Forced Sales Value and 230% at Open Market Value.
“In addition to the above, First Bank, on the directive of CBN, requested additional security in the form of FBN Holdings Plc shares held by the Chairman of Honeywell Group, Dr. Oba Otudeko citing a 2001 circular. This was duly provided through an authorization to place a lien on the shares.
“Honeywell Group has continued to meet all its obligations on its facilities with the Bank according to agreed terms and has reduced its exposure by nearly 30% in 2.5 years. The facilities were charged at market rates and the Bank continues to earn significant interest therefrom.”
With this statement, it is believed that Otudeko has questions to answer as it appears he is using FBNH shares to collateralize loan from FBN. Data from Nairalytics said FBNH had recorded a total loan impairment of over N565 billion between 2016 and 2020.