People & Money

First Bank: What’s the Fuss About Oba Otudeko?

Last week, Honeywell Group Limited (HGL) made a strategic investment in FBN Holdings through its affiliate, Barbican Capital Limited. They acquired 4,770,269,843 shares of FBN Holdings in a cross deal valued at N87.8 billion. With this deal, Oba Otudeko the Chairman of Honeywell Group and former Chairman of First Bank regained his place as the largest shareholder in the company.

However, since the announcement was made, it has stirred significant controversy and debate.

Also Read: Oba Otudeko Now the Largest Shareholder in First Bank of Nigeria

For example, On July 7, 2023, Ecobank Nigeria, a subsidiary of Ecobank Transnational Incorporated (ETI), communicated a letter to the Managing Director of FBN Holdings via their legal representative, ‘Kunle Ogunba & Associates. It was recommended that FBN Holdings decline Otudeko’s investment due to the substantial debt burden carried by Honeywell Group and its founder, Dr Oba Otudeko, being described as “humongous.” In the letter, it was explicitly stated that both Honeywell Group and Otudeko had accumulated a significant debt of N13,507,052,417.99 to the bank. The letter expressed that by investing in FBN Holdings, Honeywell Group and Otudeko were using funds that should have been allocated towards repaying their loans.

The letter by Kunle Ogunba & Associates read,

“We are Counsel to Ecobank Nigeria Limited, (hereinafter referred to as ‘our client’) on whose behalf and express directive, we author the instant. Please, be informed that our client instituted several lawsuits against Honeywell Group Limited, Siloam Global Services Limited, Anchorage Leisures Limited, Honeywell Flour Mills Plc, and Oba Otudeko at the Federal High Court, Lagos, in view of recouping the humongous indebtedness of the highlighted entities to our client.

“It is particularly noteworthy that Dr Oba Otudeko personally guaranteed the loan leading to the humongous indebtedness of the prior-mentioned companies.

“Whereas, the prior-mentioned entities had initially disputed their indebtedness to our client and had consequently filed an action in court to that effect, the Supreme Court on the 27th day of January 2023, in Appeal No. SC/CV/210/2021 delivered judgement affirming the indebtedness of the above persons to our client and further commanded that they must pay all outstanding debts that have accrued under the loan contract between the parties; being the same debt personally guaranteed by Dr Oba Otudeko, which said indebtedness stood in the sum of N13,507,052,417.99 (Thirteen Billion, Five Hundred and Seven Million, Fifty Two Thousand, Four Hundred and Seventeen Naira, Ninety-Nine Kobo) as at 31st Day of January, 2023, whilst interest continues to accrue on the due debts as legally sanctioned by the Supreme Court of Nigeria, the highest court in the land, aforesaid.”

Also Read: First Bank: Otudeko Eats His Cake, Emefiele Keeps His

Apart from Ecobank’s objection to the acquisition by Otudeko, it was also reported that some First Bank shareholders scheduled an emergency board meeting in response to Otudeko’s acquisition. While it is understandable why Ecobank has raised objections, why are board members objecting?

The current board members were appointed by the Central Bank of Nigeria (CBN) in 2021. According to the CBN Governor at the time, Mr Godwin Emefiele, replacing the board members was done to uphold the stability of the bank and safeguard the interests of minority shareholders and depositors. And with Mr Otudeko reclaiming his position as the largest shareholder in the bank, he now holds the right to sit on the bank’s board.

According to sources, shareholders are resolute in their efforts to regain control of their bank. And they are reportedly worried about the outcomes of having Otudeko regain control over the bank in any role, considering the previous issues he had with the central bank two years ago.

In a letter dated April 26, 2021, the Central Bank of Nigeria instructed Honeywell Flour Mills Plc (HFMP), which was owned by Oba Otudeko, to repay a loan to First Bank within a timeframe of 48 hours. It appears that First Bank had engaged in insider lending with Otudeko, which is not illegal but is governed by various regulations. One of which is that insiders are not provided with any special treatment, preferential interest rates, or additional advantages that are not available to regular bank customers.

The CBN alleged that First Bank provided preferential treatment to Honeywell Flour Mills when restructuring its loan facility. In the memo sent by the CBN to First Bank, it was noted that Honeywell Flour Mills’ collateral for the loan was a big regulatory concern, the collateral was Oba Otudeko’s shares in FBN Holding. According to the memo, First Bank lacked a legally binding document filed with the CBN that would enable them to make a valid claim on the collateral in the event of a loan default.

Collateralizing shares to obtain loans, as done by Otudeko, is a commonly employed strategy in the business world, and Otudeko, he’s not new to it. In 2013, HFMP’s N5.5 billion loan from Ecobank was the subject of litigation at the Supreme Court. In this case, Otudeko had used his Airtel shares as collateral to obtain loans from Ecobank for Honeywell. However, in a surprising twist, those very Airtel shares, along with certain Honeywell assets, were utilized as collateral for the credit facility obtained from First Bank.

Also Read: Shame as a Loan Collateral in Nigeria

Otudeko is not a newcomer to controversial business decisions. In May 2022, his flagship company Honeywell Flour Mills Plc was sold to his biggest competitor, Flour Mills of Nigeria in a surprising twist of events. He used his proceeds from the sale to settle the loans at First Bank, and, out of the blues, he’s making a play at the First Bank, usurping Otedola as the largest shareholder.

While a potential reappointment of Otudeko as the Chairman of First Bank is highly unfeasible, a sitting on the board is likely. Although the 79-year-old Otudeko might not assume the seat, he currently holds a controlling stake in the bank. The actions to be taken in light of his past behaviour are yet to be determined.

David Olujinmi

David Olujinmi studies Engineering but his true passion is research and analysis. He writes about finance, particularly the capital market, investment banking, and asset management. More »

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