CBN removes Boards of First Bank of Nigeria, FBN Holdings, Appoints New Chairman.

On Thursday night (29/04/21), the governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, announced the sacking of the entire members of the board of First Bank Holding and First Bank Nigeria Limited (FBN).

In the past, the CBN has fired the entire board of directors of banks, but such cases were often preceded by a crisis in the bank and usually resulted in the bank's nationalization. The CBN also reinstated Sola Adedutan as MD/CEO of a newly announced interim board of directors.

Why did the CBN sack the board of directors?

 

On Wednesday (28/04/21), the board of directors had announced that Gbenga Shobo had been appointed as the new MD/CEO of the bank. However, the CBN—a key stakeholder in FBN—was not given prior notice for this appointment. FBN has been under the CBN forbearance regime since 2016 after a CBN target examination revealed that the bank was in grave financial condition with its non-performing loan ratios substantially breaching acceptable prudential standards.

A non-performing loan (NPL) is a loan in which the borrower defaults because they have not made scheduled payments for a specified period (usually 90 days). FBN's problems were attributed to bad credit decisions, significant and non-performing insider loans, and poor corporate governance practices. The CBN stepped in to help the bank in its quest to maintain financial stability because of  FBN’s systemic importance to the Nigerian banking sector given its historical significance, large customer base, and high level of interconnectedness with other financial service providers.

Measures implemented by the CBN had yielded positive results as the financial condition of FBN improved progressively between 2016, when the forbearance was initially granted, and the current financial year. FBN’s profitability and liquidity improved while NPLs reduced significantly. Despite these improvements, the insiders who took loans from the bank (and had a 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. 

This, combined with the fact that the CBN believed that FBN’s appointment of a new MD sent a "negative signal to the market on the stability of the leadership of its board and management,"......... caused the CBN to take swift action to dismiss the board of directors and reinstate Sola Adedutan as MD of the bank.

The CBN believes that by doing this, it is “protecting the minority shareholders (who have no voice to air their views) and the over 31 million customers of the bank who see FBN as a haven for their hard-earned savings.”

Source: Money Africa

 

I have read all the details and if they are correct CBN is on the right track. Unsupervised Insider dealing can be cancerous if prompt counter actions are not taken.