OVER a week ago, Nigeria’s apex bank announced the sack of the Board of First Bank of Nigeria (FBN), citing the previous board’s decision to implement ‘changes’ without alerting regulatory authorities, poor corporate governance and insider dealings.

The Central Bank of Nigeria (CBN) said its decision to wield the stick on First Bank and its holding company, FBN Holdings Plc, was in the interests of its minority shareholders and depositors.

“The sacking of the board was done in order to preserve the stability of the bank, so as to protect minority shareholders and depositors,” according to a media briefing by CBN Governor Godwin Emefiele.

Prior to CBN’s sack of the board, it had directed First Bank to recover the loan it had granted to Honeywell Nigeria Plc, a company owned by the former chairman of FBN Holdings Plc, Oba Otudeko, or face appropriate regulatory measures for insider borrowing.

According to a report, the loan was to the tune of N75 billion but the annual or interim reports of Honeywell Nigeria Plc did not reveal the total amount the company owed the bank.

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It stated that Honeywell’s current portion of its loan to First Bank is N13.5 billion, including the overdraft facility of N2.9 billion. However, CBN alleged that First Bank gave special treatment to Honeywell Flour Mills by restructuring its loan facility.

First Bank, Nigeria’s oldest lender, has over 31 million customers, with deposits of N4.2 trillion and also accounts for a 22 per cent share of the country’s instant payments processing capacity.

Otudeko used his FBN shares as collateral

Since 2016, First Bank non-performing loans, when compared with its Capital Adequacy Ratio (CAR), was beyond acceptable standards, according to the CBN.

CAR is the measure of the capital that banks have to protect customers’ deposits. When it is less than non-performing loans, it means that the bank’s liabilities are greater than its assets.

According to data from Nairalytics, FBN Holdings had recorded a total loan impairment of over N565 billion between 2016 and 2020, while N376.4 billion, accounting for more than half the total loans impaired, was provided for in 2016 and 2017.

In its statement, the CBN stated that First Bank might have collapsed were it not for its regulatory forbearance, a financial term for softening some of the strict rules that banks must comply with if they were to avoid being taken over by the CBN.

First Bank’s bad loan ratio improved to 7.7 per cent in 2020, compared to 20 per cent in 2018, following the restructuring and write-offs of corporate debts.

READ ALSO: https://www.icirnigeria.org/explainer-why-cbn-ousted-board-of-first-bank/