Nigeria’s Central Bank Removes Board of Third-Largest Lender

LAGOS (Capital Markets in Africa) – Nigeria’s central bank removed the boards of FBN Holdings Plc and its main subsidiary First Bank Nigeria Ltd. for appointing a new chief executive officer without regulatory approval.

The Central Bank of Nigeria ousted Gbenga Shobo as CEO of First Bank Nigeria and reinstated former head, Adesola Adeduntan, a day after it queried the appointment, Governor Godwin Emefiele said at a media briefing on Thursday.

First Bank, Nigeria’s oldest lender and the third-largest by assets, is considered by the central bank as a systemically important bank. This classification is used for lenders that would pose a significant risk to the banking system if they failed.

The action against the bank is to protect minority shareholders and customers, Emefiele said. The central bank decided to reinstate Adeduntan because it has worked with him since 2016 to restore the bank to a healthy position after it accumulated bad loans that threatened its existence, Emefiele said. It also named Remi Babalola as Chairman of FBN Holdings and Tunde Odukola as the chairman of the banking subsidiary.

FBN has over 31 million customers, deposits of 4.2 trillion naira ($10.3 billion) and a 22% share of the country’s instant payments processing capacity, Emefiele said.

Adeduntan, who was due to retire in December this year, was forced out on Wednesday against the wishes of the central bank, which warned the board it would take disciplinary action if the move wasn’t explained, Emefiele said.

The removed chairman of FBN Holdings, Oba Otudeko, rejected an appeal from the central bank not to let go Adeduntan, Emefiele said. “We will not allow a shareholder who feels he will not subject himself to regulatory control and authority to remain as a director of the bank,” he said.

Under a new banking act signed into law in last year, the central bank has the power to acquire the shares of any failing lender to the level that guarantees its control of the bank.

The board tussle could slowdown the bank’s recovery in recent years. First Bank’s ratio of non-performing loans to total credit improved to 7.7% at 2020 year-end from more than 20% in 2018, following the restructuring and write-offs of corporate debts. The lender’s capital adequacy ratio, which has hovered around the regulator’s 15% threshold improved to 17% in 2020 from 15.5% the year earlier.

The lender’s shares declined 3.62% to 6.65 naira as of 10:22 a.m. in Lagos on Friday, the lowest price its traded this year.

Source: Bloomberg Business News