The Central Bank of Nigeria (CBN) late Wednesday announced the dissolution of the boards and management of Union Bank, Polaris Bank and Keystone Bank.
Hours later, it appointed new executives (two each) to “oversee the affairs of the banks”, ostensibly till the time new boards and management will be reconstituted.
All three banks are privately owned.
Union Bank adopted private ownership last November after Titan Trust Bank, its majority shareholder, acquired the stakes of other shareholders, causing the lender to delist its shares from the Nigerian Exchange.
“This action became necessary due to non-compliance of these banks and their respective boards with the provisions of Section 12(c), (f), (g), (h) of Banks and Other Financial Institutions Act, 2020,” the CBN said in a statement.
It went further to cite corporate governance lapses, regulatory non-compliance, breach of terms under which the banks got their licences and “involvement in activities that pose a threat to financial stability” among the reasons.
The move is believed to have followed the outcome of the forensic audit of the CBN under Godwin Emefiele, the former governor of the apex bank by a special investigator appointed by President Bola Tinubu.
Union Bank
A report submitted to the president by the special investigator last month alleged that Mr Emefiele used “ill-gotten wealth” to set up Titan Trust Bank which he, in turn, used to acquire Union Bank and Keystone Bank through proxies.
The document noted that two “Dubai-based” firms namely Magna International DMCC and Luxis International DMCC, owned by Vink Corporation Middle East FZC, were used as proxies by Mr Emefiele to establish Titan Trust Bank.
The special investigator said it discovered that the two entities have no physical presence in Dubai as claimed after requesting the Nigerian embassy in the UAE to verify their locations and corporate status.
Vink Corporation is a subsidiary of Tropical General Investments (TGI) Group, a conglomerate boasting N3.75 trillion in assets founded and controlled by Dutch-Nigerian Cornelius G Vink.
Titan Trust Bank, established in 2018, between October 2021 and June 2022 acquired a 94.05 per cent stake in three phases in 106-year-old Union Bank.
“The acquisition of Union Bank of Nigeria by Titan Trust Bank followed all the laid down rules and regulations. The approximately USD500 million capital used to pay for the transaction was transparent and unimpeachable,” TGI said in a statement in December.
“The purported investigation report recommended that the federal government should take over the two banks in question. Such declarations based on incorrect assumptions portray Nigeria negatively… The investigator’s claim that Union Bank did not respond to his request for information was misleading as all the information requested was submitted on the 1st September 2023,” it added.
TGI affirmed that it sourced the roughly USD 500 million used for the acquisition of Union Bank from a USD 300 million credit facility from the African Export-Import Bank and the proceeds of TGI’s sales of its Chi Limited business to Coca-Cola.
The special investigator recommended that both Union Bank and Keystone Bank be nationalised.
Polaris Bank
Polaris Bank was established in 2018 as a bridge bank to take over the assets and liabilities of the defunct Skye Bank after the CBN found some “unacceptable corporate governance lapses as well as the persistent failure of Skye Bank PLC to meet minimum thresholds in critical prudential and adequacy ratios.”
The CBN in October 2022 announced the sale of Polaris Bank to Strategic Capital Investment Limited (SCIL) for N50 billion in a joint decision with Asset Management Corporation of Nigeria (AMCON).
READ ALSO: CBN appoints new management teams for Keystone, Polaris and Union Banks
The terms of the deal required SCIL to repay the N1.3 trillion lifeline the CBN injected into Polaris Bank in the four years before SCIL’s acquisition.
Last June, a PREMIUM TIMES investigation revealed for the first time that venture capitalists Michel Danladi Verheijen and Ehimari Idahi as well as Albert Chukwuemeka Emuwa, a former CEO of Union Bank, used offshore entities to hold their 45 per cent stake in Polaris Bank.
The full disclosure of their stakes and the details of the bank’s beneficial ownership were absent from Polaris Bank’s documentation with the Corporate Affairs Commission according to PREMIUM TIMES findings.
That contravenes the provisions of the Companies and Allied Matters Act 2020. Only the 55 per cent controlling interest in the lender, held by real estate magnate Auwal Lawal, was known to the public before the time.
SCIL was registered with the Corporate Affairs Commission just six months before it was chosen above other suitors to acquire Polaris Bank.
“CAC checks further show that SCIL has two PSCs or beneficial owners, with both being corporate entities: Ponglomerape Limited (55 per cent) and Clotaire Investment Limited (45 per cent),” the PREMIUM TIMES report said.
While Ponglomerape is 99 per cent owned by Mr Lawal, Clotaire is fully owned by a Jersey-based offshore entity known as Zagamon.
Keystone Bank
AMCON sold Keystone Bank in 2017 to a consortium of local investors called Sigma Golf Nigeria Limited and Riverbank Investment Resources as the preferred choice from 18 domestic and foreign bidders.
The lender was one of the three banks that were nationalised after a $4 billion bailout that helped many banks avert bankruptcy in 2009.
The special investigator said Keystone Bank had been acquired without payment evidence, adding that Mr Emefiele used proxies to acquire the lender.
Implications
The effects of the CBN’s action of sacking the banks’ boards and management are not likely to be felt directly, said Olumide Sole, sub-Saharan Africa’s banking research analyst at Vetiva Capital.
“It is not good generally for the banking system in Nigeria,” as it could breed distrust in the system, Mr Sole added.
He argued that the cycles of banks’ board dissolution, initiated by the CBN over the years, could weaken public confidence in the industry.
“The main pillar of the banking system is confidence. This makes the financial system very sensitive to developments that could undermine the confidence of depositors and investors,” said Muda Yusuf, founder and CEO of Lagos-based Centre for the Promotion of Private Enterprise.
“This is why the handling of current investigations concerning these banks needs to be done with utmost discretion, caution and care. We cannot afford a run on any of our banks at a time like this,” Mr Yusuf added.
He also noted that shareholders deserve to be assured of the safety of their investments even though the CBN has given some comfort to depositors by assuring them of the safety of their funds.
Share this:
Support PREMIUM TIMES’ journalism of integrity and credibility
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.
By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.
Donate
[embedded content]
TEXT AD: Call Willie – +2348098788999
Source: