CENTRAL BANK OF NIGERIA v. FBN

Section 19 of the BOFIA Act places restrictions on certain banking activities specifically the granting of loans and credit facilities, it also regulates insider loans (credit facilities to directors and officers of the bank), the credit facilities

are to be collaterised i.e. secured by assets - thus, if the borrower defaults on the loan, the lender may seize the asset and sell it to offset the loss.
Now let us examine what happened in Oba Otudeko's case and why Gov. Emefiele made this move which we have seen before in 2009

with the Sanusi Lamido Administration and the Cecilia Ibru led Oceanic Bank. Recall that in 2009, a number of banks had a financial crisis
Intercontinental, Oceanic, PHB, Wema, FinBank, AfriBank, Union Bank and this led to the removal of the MDs/CEOs

Erastus Akingbola (Intercontinental Bank); Okey Nwosu (Finbank Plc); Sebastian Adigwe (Afribank Plc);Mrs Cecelia Ibru (Oceanic Bank Plc); and Bartholomew Ebong (Union Bank Plc).
The financial cost of the intervention was in circa N5trn excluding the erosion of shareholder value.

This was as a result of a number of reasons; directors or their family members obtaining un-secured loans at the expense of depositors & also excess liquidity generated from oil revenues & bank consolidation which then flowed to non-priority sectors & the capital market

AMCON acquired thousands of Non-performing loans & toxic assets in 2009 and was reportedly able to restructure about 50% of thed NPL portfolio.
Now, back to First Bank. Otudeko was the chairman of FBN Holdings until his purported removal by the CBN Gov. He is also the chairman

of Honeywell Flour Mills. He took credit facilities from First Bank & secured it with assets however the lien has not been perfected which means that in the event of a default, there is no guarantee that FBN will be able to lay claim on the assets essentially - "unsecured loan'"

Recall that Ecobank had sued Honeywell for a loan facility which was allegedly not fully paid & is still at the supreme court. CBN's Intervention in removing the board of FBN & FBNH is fully backed by S.34 of the BOFIA especially where the board has taken decisions that can

erode shareholders and depositors funds. Allegedly the assets pledged to first bank are the same assets pledged to ecobank which is now a subject of litigation.
Let's see how all this plays out!