EXCLUSIVE: CBN asks First Bank to name in Otudeko’s Honeywell Flour Mills loan facility internal forty eight hours

The Central Bank of Nigeria has directed the Oba Otudeko owned Honeywell Flour Mills to repay a loan to First Bank internal 48 hours, in step with a memo viewed by TechCabal.

Within the letter viewed by TechCabal dated April 26, 2021, the CBN acknowledged, “In consequence, the firm (Honeywell Flour Mills) is required to completely repay its responsibilities to the financial institution internal 48 hours, failing which the CBN will purchase acceptable regulatory measures towards the insider borrower and the financial institution.”

Insider lending is when a financial institution makes a loan to 1 or extra of its hang officers or directors.

Oba Otudeko serves as the chairman of FBN Holdings PLC, the conserving firm which owns First Bank. Otudeko additionally served as Chairman of First Bank till 2010 and is additionally the Chairman of the Honeywell Neighborhood. 

Whereas insider borrowing is steady, it’s a ways area to several regulations. One such law is that insiders enact now not bag any special medicine, incentive charges, or completely different advantages now not equipped to usual financial institution customers.

However the CBN is alleging that First Bank gave special medicine to Honeywell Flour Mills in restructuring its loan facility.

Oba Otudeko, Chariman, FBN Holdings
Oba Otudeko, Chariman, FBN Holdings

Oba Otudeko FBN’s Shares as collateral

Within the identical memo viewed by TechCabal, the CBN acknowledged that it has previously written to First Bank about its pursuits within the Honeywell Neighborhood. One gargantuan regulatory utter became Honeywell Flour Mill’s collateral for the loan facility.

In step with the memo, “We further effectively-known that in four years, the financial institution is yet to splendid its lien on the shares of Mr Oba Otudeko in FBN Holdco which collateralised the restructured credit facilities for Honeywell Flour Mills contrary to the must haves precedent for the restructuring of the firm’s credit facility.” 

In easy terms, First Bank would now not have a binding doc filed with the CBN that will allow it legally thunder the collateral if there’s a default on the loan.

One memoir from 2017 claims that the loan facility is within the predicament of ₦75 billion and became non-performing forward of a most modern restructuring. But, the apex financial institution is alive to that First Bank might maybe also fair now not have performed its due diligence in securing the collateral for the credit facility. 

The apex financial institution has additionally requested First Bank to divest its pursuits in Honeywell Flour Mills Neighborhood and Bharti Airtel Nigeria Ltd. Otudeko became named Chairman of Bharti Airtel Nigeria after the Neighborhood obtained Zain spherical 2010. 

This describe to divest from the apex financial institution has its roots in yet one other financial institution loan titillating Ecobank, Oba Otudeko and a few Airtel shares frail as a collateral.

A prolonged winding utter over Airtel shares

In 2013, a N5.5 billion loan facility given to Oba Otudeko’s Honeywell Flour Mills by Ecobank turned into the matter of litigation and is genuinely serene ongoing on the Supreme Court.

In step with files reports, Otudeko’s Airtel shares had been frail as collateral for Honeywell’s Ecobank loan. But, in a charming turn of events, those identical Airtel shares as effectively as some Honeywell sources had been additionally frail as collateral for the credit facility from First Bank.

In step with one banking insider, “In a spherical about device, First Bank now owns the sources pledged to Ecobank.”

“So the identical asset (Honeywell and Airtel) is allegedly pledged to Ecobank and now not surely one of many banks can circulation in on these sources. First Bank has an equity dwelling while Ecobank has a debt dwelling.”

But Otudeko and Honeywell’s loan need to now not the best doubtless points at First Bank this week. In a separate memo, the CBN has additionally taken points with First Bank over its most modern announcement of a new MD/CEO.

Shabby transition process?

On Wednesday, the Board of Directors of First Bank of Nigeria Restricted acknowledged that it had appointed Gbenga Shobo as its Managing Director/Chief Executive Officer (CEO). Shobo’s appointment adopted the guidelines that the ancient MD/CEO, Dr Adesola Adeduntan, had retired.

However the CBN has now flagged that transition process and acknowledged it has no justification because Dr Adeduntan’s tenure has now not yet speed out, and there became no notification from First Bank to the CBN over the transition.

In a memo viewed by TechCabal dated April 28, 2021, the CBN acknowledged, “The honour of the Central Bank of Nigeria (CBN) has been drawn to media reports that the Board of Directors has licensed the elimination of the most modern Managing Director of the financial institution, Dr Sola Adeduntan, and appointed a successor to change him. The CBN notes with utter that the stream became taken with out due consultation with the regulatory authorities, in particular given the systemic significance of First Bank Ltd.”

Nonetheless, Nairametrics quoted a provide internal First Bank who acknowledged that the financial institution “adopted its company governance framework in its management change and appointed new govt directors. No Managing Director within the 127 years historical previous of FirstBank has ever tried a tenure extension. Why now?”

Given the tempo at which the CBN reacted to these dispositions and demanded stream on a 4-year case, one has to surprise how many extra systemic infractions the regulator has uncared for and managed all this while.”

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