By Osaze Omoragbon
The Central Bank of Nigeria (CBN) and First Bank have clashed over the recent appointment of a new Chief Executive Officer (CEO) which led to the apex bank querying First Bank Nigeria for violating regulatory guidelines on removal and appointment of CEOs. Management experts however faults the CBN over the query it issued to the board of First Bank after the bank announced a new CEO and the retirement of Mr Sola Adeduntan. First Bank had earlier yesterday announced the appointment of Mr Gbenga Shobo, as the new substantive CEO of the bank, subject to the approval of the CBN, while also announcing the retirement of Sola Adeduntan, who still had eight months to go before his tenure expired, according to the apex bank.
In a letter to the board, the CBN admonished the bank for not seeking regulatory approval before proceeding to retire the former CEO, given the status of First Bank as a systemic important financial institution. “Given that the tenure of Dr. Adeduntan is yet to expire and the CBN was not made aware of any report from the Board indicting the Managing Director of any wrong-doing or misconduct, there appears to be no apparent justification for the precipitate removal”, the CBN stated in the query.
However management experts say the CBN has overstepped its mandate by issuing the query to First Bank because in their view, the apex bank does not have the power to determine when a bank can decide to fire a CEO. “Of course there are regulations guiding the appointment of a CEO and First Bank, to me, has followed due process by acknowledging that the appointment of the new CEO is subject to regulatory approval” says a top management staff of a bank who pleaded anonymity. “By asking a bank to seek its approval before firing or retiring an employee, the CBN is arogating to itself powers it does not have”.
However a senior banker sided with the apex bank saying the CEO of every bank is a member of the ethics and corporate governance committee of the bank that reports to the CBN and not the board of the bank. Without carrying the CBN along, the banker says there seems to be a conflict of interest in the sense that a critical component of CBN’s reporting line has been removed without it knowing the reason. According to him, First Bank cannot feign ignorance of the rule saying “currently GTBank is shopping for a replacement for Segun Agbaje and the CBN is aware of that. So First Bank has a lot of explaining to do”.
Insider Loans
Some observers however say there may be more to the query than just the appointment of the CEO. The CBN also queried the bank for violating the terms of regulatory approval which granted it permission to restructure insider loans that belonged to a major shareholder of the bank, Oba Otudeko, who is also the chairman of Honeywell Flour Mills. The CBN accused First Bank of not adhering to repeated reminders to divest its interest from Honeywell Flour Mills and therefore terminated the restructuring and now demand the full repayment of the credit facility. As a result, the apex bank demanded full repayment of the facility within 48 hours, of which failure will result in regulatory sanction melted out to the bank. The apex bank also accused First Bank of failing to divest from Bharti Airtel Nigeria Limited in line with extant regulation. Otudeko is the former Chairman of and is believed to retain interest in Bharti Airtel Nigeria.
However sources within First bank countered that the appointment of a new CEO was in line with its succession planning that provides for a maximum of six years of two terms of three years each and accused the CBN of meddling in the internal affairs of the bank. Not everyone is convinced with the position of the bank. A financial analyst who prefers anonymity says First Bank probably leaked the query to distract from the substantive issues raised by the CBN. “The removal of Adeduntan may not be unconnected to the insider loans that concern Oba Otudeko. Is there something the bank is trying to obfuscate by removing adeduntan” he queried.
By removing the regulatory cover for the insider loan restructuring, some say the CBN is baying for blood and advised First Bank to move fast to contain the crisis. “If the loans cannot be paid within the time stipulated by the apex bank, what happens is that First Bank will have to make provisions for the loans in their books, in which case it will impact their balance sheet negatively and also expose Otudeko to loan recovery through AMCON. Except, of course he can raise the money to pay back” a senior banker said. Media reports claim sources within the bank are linking the current crisis rocking First Bank to its support for fintechs, especially Flutterwave which according to them has angered the CBN. Flutterwave and other fintechs were accused of supporting EndSARS organisers, which led the CBN to suspend money transfer services of the indicted fintechs. It should be noted that TheEconomyng.com is yet to independently verify these claims. The last has not been heard in the matter as the apex bank gave First Bank until 5pm today to respond to its query.