Why CBN Sacked All Board of Directors of First Bank, FBN Holdings

There is a brewing corporate war at First Bank of Nigeria after the Central Bank of Nigeria (CBN) led by Godwin Emefiele removed the entire board of directors of the bank and its parent company, FBN Holdings Plc.

While announcing the sack in a television broadcast later on Thursday, April 29, Emefiele reinstated Sola Adeduntan as the Managing Director of First Bank following his replacement by the now sacked board of the bank.

Adeduntan’s removal triggered the tsunami currently underway in the bank. The CBN had said the MD was removed without its knowledge and he had not reached his 10-year tenure stipulated by the apex for bank CEOs.

“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,” Emefiele had said in his statement.

In the broadcast, Emefiele announced the appointment of new directors for FBN Holdings with Remi Babalola as the Chairman. Other directors are Dr. Fatade Abiodun, Oluwole, Kofo Dosekun, Remi Lasaki, Dr. Alimi Abdulrasaq, Ahmed Modibbo, Khalifa Imam, Sir Peter Aliogo, and UK Eke (Managing Director).

The CBN Governor also appointed new directors for the First Bank of Nigeria with Tunde Hassan-Odukale as the Chairman. Other directors include Tokunbo Martins, Uche Nwokedi, Adekunle Sonola, Isioma Ogodazi, Ebenezer Olufowose, Ishaya Elijah B. Dodo.

Emefiele demoted Gbenga Shobo, back to the position of Deputy Managing Director. Shobo was just appointed by the sacked board on Wednesday as the MD/CEO of the bank to replace Adeduntan whom the CBN has now reinstated.

Why Emefiele sacked the First Bank directors

The CBN Governor said the bank is in “grave financial condition with its Capital Adequacy Ratio (CAR) and Non-Performing Loans ratio (NPL) substantially breaching acceptable prudential standards.”

Under the removed board, he said the bank was characterized by insider abuse, insider credit and a breakdown of corporate governance.

Emefiele said, “the insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank. The CBN’s recent target examination as at December 31, 2020, revealed that insider loans were materially non-compliant with restructure terms (e.g. non perfection of lien on shares/collateral arrangements) for over 3 years despite several regulatory reminders. The bank has not also divested its non-permissible holdings in non-financial entities in line with regulatory directives.”

He urged the depositors, creditors and other stakeholders of First Bank to be confident in the apex bank’s commitment to ensure the stability of the bank’s financial system.

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The First Bank side

Sources within First Bank said the replacement of the MD was in line with the bank’s corporate governance framework which stipulates a 6-year tenure. Adeduntan’s tenure was said to be formally due in June 2021. 

“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,” an anonymous source at the bank told Nairametrics.

The source added that “no Managing Director in the 127 years history of FirstBank has ever attempted a tenure extension. Why now?”, suggesting an ulterior motive behind CBN’s decision.

Multiple sources at the bank are alleging that the CBN move may be payback for First Bank’s partnership with Flutterwave, Africa’s latest unicorn and digital payments company, and other tech companies. The CBN, through its recent policies, has been perceived to be stifling the growth of tech companies in the country, one of which was the ban on cryptocurrency conversion to naira.

There are speculations that the sacked boards of FBN Holdings and First Bank, chaired by Oba Otudeko and Awosika respectively, are staging plans to fight back through legal means.