First Bank has for the longest time been the most trusted and recognizable name in the Nigerian banking landscape. This was borne out of the fact that it was the first bank to be established in Nigeria initially called British Bank of West Africa (BBWA) under royal charter.
As the oldest bank in the country for over 120 years, it had certain advantages many other banks do not have. Some of those include a loyal customer base and deep networks across both the public and private sectors. Just to prove the strength of the bank’s connections, since the return of democracy in 1999, 2 of the 4 Central Bank of Nigeria (CBN) governors have been former Managing Directors of the bank. Other directors have ended up being appointed either Ministers or other significant political appointments.
The case of the last week with the ouster of the MD, Dr. Sola Adeduntan by the Oba Otudeko-led board is akin to what might be termed a coup as it was not sanctioned by the regulator. The CBN performed its duty by rightly rescinding the action of appointing the Deputy MD, Mr Gbenga Shobo and sacking the entire Board at both the Holdings and Bank level. The action by the Otudeko board was in breach of laid down procedures where to appoint or sack a bank director, it must be approved by the CBN. It is common knowledge that even from the Assistant General Manager level in the banking industry requires CBN approval, so this case of appointments is highly unusual.
The question many have asked is how did First Bank get here? And it just takes going back barely two decades. In 2001, the former MD, Mr Bernard Longe alongside the Board approved a loan of $112m to Investors International of London (IILL) to purchase a GSM licence. The bid went South, IILL was unable to perform on its loans and Bernard Longe was to be made out as a scapegoat by the Board and was sacked. He took the bank to court, won and received a compensation.
The drama of Otudeko owing the bank and allegedly abusing his position is no different. It stems from the heady days of Mr Bisi Onasanya who oversaw the expansion of a Non Performing Loan (NPL) book like never seen in the history of the Nigerian banking industry. According to some estimates, the total NPLs under his watch is about 1.3 trillion naira. Many of the loans were originated deliberately to go bad with some members of the Board benefiting directly. Otudeko was one of those with a loan portfolio of what is estimated to be 75 billion naira. The collateral behind these loans are said to be Honeywell shares and Airtel shares owned by Otudeko. However, despite regulatory forbearance, Otudeko refused to pay up on these loans despite being the Chairman of the bank. The culture of bad loan writing seems embedded in the DNA of the bank.
It is very worrisome that board members who are also majority shareholders and should be acting in the best interests of minority shareholders only view the bank as an avenue to funnel resources to their other businesses without paying up. There are those who say the bank is a political party masquerading as a bank divided along factions swaying to what faction of the party is in power. There are suggestions that Mike Adenuga (another major shareholder) is the backer of the current MD, Dr. Sola Adeduntan and has rebuffed attempts by Otudeko to avoid meeting his loan obligations.
But what is even most curious is the blatant disregard that Otudeko seemingly has for the CBN Governor. In his speech announcing the re-appointment of Dr. Sola Adeduntan, Godwin Emefiele said, “I spoke to Mr. Oba Otudeko , he refused to grant my entreaties. I had to call two of his 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. 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.”
While we must commend the boldness of the CBN to take this step now, we must also ask why it took this long to sack Otudeko as Chairman of the bank. In a bank that has been a recipient of liquidity support and regulatory forbearance, directors cannot operate as they choose. Had Otudeko not gone ahead with his coup, would he still be Chairman? How many more banks are their Non Perfoming Loans understated? How fragile is the entire banking system? These are the questions that demand answers and go beyond just the curious case of Otudeko and First Bank of Nigeria.