The Central Bank of Nigeria (CBN) has instructed Honeywell Flour Mills, owned by Oba Otudeko, to settle its outstanding loan with First Bank within 48 hours.
Dated April 26, 2021, the document states, “Honeywell Flour Mills is required to fully repay its obligations to First Bank within 48 hours, failing which the CBN will take regulatory action against the borrower and the bank.”
Insider lending, where banks extend credit to their directors or officers, is permissible under strict regulations. These rules mandate that insiders must not receive preferential terms unavailable to other customers.
Oba Otudeko, the chairman of FBN Holdings (First Bank’s parent company) and Honeywell Group, is accused of benefiting from special treatment. The CBN alleges that First Bank restructured Honeywell’s loan facility without adhering to regulatory requirements.
Questionable Collateral and Loan Restructuring
The CBN raised concerns about the security for the loan. It noted that First Bank failed to finalize legal claims on Otudeko’s shares in FBN Holdings, which were used as collateral for restructuring Honeywell’s credit.
The memo highlighted that this legal lapse had persisted for four years, contrary to conditions for the restructuring. Reports suggest that the loan, estimated at ₦75 billion, was previously classified as non-performing.
Order to Divest Interests
The CBN also directed First Bank to divest its interests in Honeywell Flour Mills and Bharti Airtel Nigeria. This instruction stems from a past dispute involving Ecobank, Otudeko, and Airtel shares used as collateral for multiple loans.
Airtel Shares and Collateral Issues
In 2013, Honeywell’s ₦5.5 billion loan from Ecobank sparked a legal battle, still ongoing at the Supreme Court. Airtel shares pledged as collateral for this loan were reportedly also used to secure First Bank’s loan.
A banking insider explained, “The same assets—Honeywell and Airtel shares—are pledged to both banks. First Bank holds an equity stake, while Ecobank retains a debt position, creating a legal standoff.”
Leadership Transition Dispute
Separately, the CBN criticized First Bank for announcing a leadership change without prior regulatory consultation. On April 28, 2021, the CBN noted media reports of Gbenga Shobo’s appointment as Managing Director/CEO, replacing Dr. Adesola Adeduntan, whose tenure had not yet expired.
The regulator expressed concern over the bank’s decision, given First Bank’s systemic importance, and emphasized that such transitions must involve regulatory approval.
While First Bank claimed adherence to corporate governance practices, insiders questioned the motives behind the abrupt leadership change.
These rapid developments raise questions about broader systemic issues within Nigeria’s financial sector and the regulatory oversight applied by the CBN.
