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

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

In 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 bank internal 48 hours, failing which the CBN will spend acceptable regulatory measures in opposition to the insider borrower and the bank.”

Insider lending is when a bank makes a loan to 1 or more of its relish officers or directors.

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

Whereas insider borrowing is lawful, it is field to loads of regulations. One such regulations is that insiders pause no longer get any particular treatment, incentive rates, or other benefits no longer offered to regular bank customers.

Nonetheless the CBN is alleging that First Bank gave particular treatment to Honeywell Flour Mills in restructuring its loan facility.

Oba Otudeko, Chariman, FBN Holdings

Oba Otudeko FBN’s Shares as collateral

In the identical memo viewed by TechCabal, the CBN acknowledged that it has previously written to First Bank about its interests in the Honeywell Neighborhood. One tremendous regulatory effort became once Honeywell Flour Mill’s collateral for the loan facility.

In step with the memo, “We extra vital that in four years, the bank is yet to perfect its lien on the shares of Mr Oba Otudeko in FBN Holdco which collateralised the restructured credit companies and products for Honeywell Flour Mills contrary to the situations precedent for the restructuring of the firm’s credit facility.” 

In straightforward terms, First Bank does no longer have a binding doc filed with the CBN that can enable it legally deliver the collateral if there’s a default on the loan.

One story from 2017 claims that the loan facility is in the sphere of ₦75 billion and became once non-performing sooner than a most popular restructuring. Yet, the apex bank is concerned that First Bank may per chance well furthermore simply no longer have conducted its due diligence in securing the collateral for the credit facility. 

The apex bank has furthermore asked First Bank to divest its interests in Honeywell Flour Mills Neighborhood and Bharti Airtel Nigeria Ltd. Otudeko became once named Chairman of Bharti Airtel Nigeria after the Neighborhood bought Zain around 2010. 

This present to divest from the apex bank has its roots in yet one other bank loan sharp Ecobank, Oba Otudeko and some Airtel shares feeble as a collateral.

A long winding effort over Airtel shares

In 2013, a N5.5 billion loan facility given to Oba Otudeko’s Honeywell Flour Mills by Ecobank changed into the matter of litigation and is surely level-headed ongoing at the Supreme Court.

In step with news studies, Otudeko’s Airtel shares were feeble as collateral for Honeywell’s Ecobank loan. Yet, in a moving flip of occasions, those identical Airtel shares to boot to some Honeywell assets were furthermore feeble as collateral for the credit facility from First Bank.

In step with one banking insider, “In a round about capacity, First Bank now owns the assets pledged to Ecobank.”

“So the identical asset (Honeywell and Airtel) is allegedly pledged to Ecobank and no longer one in all the banks can switch in on these assets. First Bank has an equity space while Ecobank has a debt space.”

Nonetheless Otudeko and Honeywell’s loan are no longer essentially the most attention-grabbing concerns at First Bank this week. In a separate memo, the CBN has furthermore taken concerns with First Bank over its most popular announcement of a brand new MD/CEO.

Shabby transition route of?

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

Nonetheless the CBN has now flagged that transition route of and acknowledged it has no justification because of the Dr Adeduntan’s tenure has no longer yet bustle out, and there became once 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 studies that the Board of Directors has accredited the removal of the sleek Managing Director of the bank, Dr Sola Adeduntan, and appointed a successor to replace him. The CBN notes with effort that the action became once taken without due consultation with the regulatory authorities, in particular given the systemic significance of First Bank Ltd.”

Nonetheless, Nairametrics quoted a supply internal First Bank who acknowledged that the bank “followed its company governance framework in its management trade and appointed new govt directors. No Managing Director in the 127 years historical past of FirstBank has ever attempted a tenure extension. Why now?”

Given the pace at which the CBN reacted to those trends and demanded action on a 4-twelve months case, one has to marvel what number of more systemic infractions the regulator has brushed off and managed all this while.

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