Last week, in acting out its role as the regulator and guarantor of the nation’s financial system, Central Bank of Nigeria, (CBN) carried out some changes in the management and board of First Bank of Nigeria, the nation’s oldest financial institution.
The immediate trigger to this was the sacking by the board of FBN’s Managing Director Dr Adesola Adeduntan who still had eight months of his tenure left, and his replacement with his deputy, Gbenga Shobo.
The sacking of Adeduntan, despite his reported performance, which was done without CBN’s prior approval, drew the apex bank’s ire, and which promptly reversed the measures taken by the board. CBN reinstated Adeduntan as Chief Executive, asked his deputy to revert to his position, while the board was sacked and replaced by new appointees.
Underlying all this was CBN’s concern at the non-compliance with a directive that First Bank divest its interest in Honeywell Flour Mills Plc, a company owned by one of its major shareholders and directors, Oba Otudeko.
From what transpired, the case of First Bank’s involvement with Honeywell Flour Mills smacks of insider trading by Oba Otudeko using his strong connections within the Bank to secure humongous loans to run the company in flagrant disregard for extant banking and financial regulations. It was reported that First Bank committed up to about N75 billion into Honeywell, which CBN queried and directed the Bank to begin immediate recovery of funds loaned out to Honeywell.
The whole issue exposes the unnerving fact that the oldest bank, one of the largest and supposedly well run financial institutions in the country is not immune to sharp practices usually associated with banks of less pedigree and standing. Indeed, alongside the case of First Bank, it was reported that some of the nation’s blue chip banks are labouring under massive unsecured loans and similar financial infractions as in the case of First Bank.
If allowed to go unchecked, this development can only serve to unnerve millions of depositors and further distress the nation’s financial system at this critical period of general economic uncertainty in the country.
As it has done with First Bank, CBN needs to move in swiftly to identify and root out cases of financial infractions in the nation’s financial system so as to prevent further erosion of confidence.
