The First Bank of Nigeria has accused the Central Bank of Nigeria of meddling in its corporate governance framework which is part of its over a century heritage. This accusation is a fallout of the query issued to First Bank by the Central Bank of Nigeria (CBN) over the removal of its CEO and appointment of a new one saying the actions of the Bank goes against laid down rules. This follows the decision of the Board of Directors of First Bank of Nigeria Limited to appoint Gbenga Shobo as its Managing Director/Chief Executive Officer (CEO).
The appointment which was made known in a statement signed by the Chairman of First Bank Ibukun Awosika followed the removal of the Bank’s current Managing Director Dr. Sola Adeduntan. However, the apex bank wrote First Bank expressing reservations about the development as that decision went contrary to existing guidelines in the removal and appointments of bank chief executive officers did not have the approval of the Central Bank.
The apex bank in its query said; “The attention of the Central Bank of Nigeria (CBN) has been drawn to media reports that the Board of Directors has approved the removal of the current Managing Director of the bank, Dr. Sola Adeduntan, and appointed a successor to replace him. The CBN notes with concern that the action was taken without due consultation with the regulatory authorities, especially given the systemic importance of First Bank Ltd.”
The CBN also claimed that the tenure of Mr. Adedutan was yet to expire (bank MD’s have a maximum 10 years) and that they were also not aware of any misconduct of the former MD and as such there was no justification for his removal.
“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.”
However, sources within the bank say that First Bank has a maximum of 6 years tenure for its MDs in line with its succession plans. They also claimed the CBN is meddling in its internal affairs as the removal of the MD is in line with its succession plans and also does not exceed CBNs maximum of 10 years.
“First Bank followed its corporate governance framework in its change of leadership and appointment of new executive directors. No Managing Director in the 127 years history of FirstBank has ever attempted a tenure extension. Why now?”
Another source said that “Adeduntan’s term formally ends in June this year after 2 terms of 3 years each. Leaving early is in line with the bank’s succession planning. When he was appointed 6 years ago and a DMD role was created, the erstwhile FirstBank Managing Director knew the DMD would succeed him and this is what has happened. This is corporate governance at its best.”
However, the apex bank in the leaked letter also suggested that it had provided First Bank with “regulatory forbearance” which can be interpreted as a bailout subliminally indicating that it has a say in the operations of the bank.
“We are particularly concerned because the action is coming at a time the CBN has provided various regulatory forbearances and liquidity support to reposition the bank which has enhanced its asset quality, capital adequacy and liquidity ratios amongst other prudential indicators. It is also curious to observe that the sudden removal of the MD/CEO was done about eight months to the expiry of his second tenure which is due on December 31, 2021. The removal of a sitting MD/CEO of a systemically important bank that has been under regulatory forbearance for 5 to 6 years without prior consultation and justifiable basis has dire implications for the bank and also portends significant risks to the stability of the financial system.”
Sources within the bank also allude without proof that the involvement of the central bank in this matter may also be due to First Bank’s support of Flutterwave which may have angered CBN.
“Is this payback for FirstBank for supporting and enabling Flutterwave and other tech companies? FirstBank MD-Designate, Gbenga Shobo created a revolution by partnering with Flutterwave and other tech companies. Is this payback? The CBN Governor must be called to order. This is not a banana economy. We need to preserve the FirstBank heritage with its seamless succession planning.”
It is unclear how this matter will end but stemming from experience, we will not be surprised if this matter ends in court in a few days. The Central Bank has often controversially delved into board-related issues such as appointments and even firing of all or some Board members for what it perceives as severe infractions.
And as expected, it ended its query to the bank with a threat to the board if the decision to remove Adeduntan is not reversed.
“In light of the foregoing, you are required to explain why disciplinary action should not be taken against the Board for hastily removing the MD/CEO and failing to give prior notice to the CBN before announcing the management change in the media.”