According to First Bank sources, CBN is interfering in the bank’s internal affairs.
The Central Bank of Nigeria has issued the Board of First Bank Ltd, one of Nigeria’s oldest banks a query for the removal of its CEO.
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On Wednesday, First Bank of Nigeria Limited’s Board of Directors announced the appointment of Gbenga Shobo as Managing Director/Chief Executive Officer (CEO).
The appointment was announced by the bank’s Chairman, Ibukun Awosika, in a tweet.
In an apparent leak, a letter from the central bank to First Bank exposed a question from the former to the latter, expressing concern that Shobo’s appointment was made without the approval of the apex bank.
“The Central Bank of Nigeria (CBN) has been alerted to media reports that the Board of Directors has approved the resignation of the bank’s current Managing Director, Dr. Sola Adeduntan, and the appointment of a replacement to replace him.
The CBN is concerned that the action was taken without proper consultation with the regulatory authorities, particularly given First Bank Ltd’s systemic importance.”
The CBN also said that Mr. Adedutan’s term has yet to expire (bank MDs have a maximum tenure of 10 years) and that they were also unaware of any corruption by the former MD, so there was no basis for his expulsion.
“Given that the tenure of Dr. Adeduntan is yet to expire and the CBN was not made aware of any report from the Board indicating the Managing Director of any wrong-doing or misconduct, there appears to be no apparent justification for the precipitate removal.”
However, sources within the bank revealed that First Bank has a maximum of 6 years tenure for its MDs in line with its succession plans. They also claimed the CBN is meddling in its internal affairs as the removal of the MD is in line with its succession plans and also does not exceed CBNs maximum of 10 years.
“In changing leadership and appointing new executive officers, First Bank adhered to the corporate governance structure.
In FirstBank’s 127-year history, no Managing Director has ever sought a tenure extension.
“What’s the hurry?”
Another source, who did not want to be identified because they were not allowed to do so, expressed regret that “Adeduntan’s term officially ends in June this year after two terms of three years each.”
The decision to leave early is consistent with the bank’s succession planning.
When he was named 6 years ago and a DMD position was established, the former FirstBank Managing Director anticipated that the DMD will replace him, and that is exactly what has occurred.
This is excellent corporate governance.”
However, the apex bank in the leaked letter also suggested that it had provided First Bank with “regulatory forbearance” which can be interpreted as a bailout subliminally indicating that it has a say in the operations of the bank.
“We are particularly concerned because the action is coming at a time the CBN has provided various regulatory forbearances and liquidity support to reposition the bank which has enhanced its asset quality, capital adequacy and liquidity ratios amongst other prudential indicators. It is also curious to observe that the sudden removal of the MD/CEO was done about eight months to the expiry of his second tenure which is due on December 31, 2021. The removal of a sitting MD/CEO of a systemically important bank that has been under regulatory forbearance for 5 to 6 years without prior consultation and justifiable basis has dire implications for the bank and also portends significant risks to the stability of the financial system.”
Sources within the bank also suggest, without providing proof, that the central bank’s presence in this matter may be related to First Bank’s sponsorship of Flutterwave, which may have enraged the CBN.
“Is this payback for FirstBank for supporting and enabling Flutterwave and other tech companies? FirstBank MD-Designate, Gbenga Shobo created a revolution by partnering with Flutterwave and other tech companies. Is this payback? The CBN Governor must be called to order. This is not a banana economy. We need to preserve the FirstBank heritage with its seamless succession planning.”
It is uncertain if this matter will be resolved, but based on past practice, we will not be shocked if it is resolved in court within a few days.
The Central Bank has also engaged in contentious board-related matters, such as appointing and occasionally dismissing any of any Board members for what it considers to be serious infractions.
And, predictably, it concluded its question to the bank with a warning to the board if the decision to suspend Adeduntan is not reversed.
“In view of the above, you are asked to clarify why the Board should not face punitive action for hastily replacing the MD/CEO and failing to provide advance notice to the CBN before reporting the management change in the media.