- First Bank's decision to remove its chief executive officer, Sola Adeduntan, is likely to cost the company
- CBN questioned Adeduntan's replacement with Gbenga Shobo this week, demanding for circumstances that caused CEO's exit
- Adeduntan was replaced by Shobo before his tenure wind up in December, and CBN condemned the decision
The Central Bank of Nigeria and First Bank are at loggerheads over the exit of Sola Adeduntan, the banks Chief Executive Officer who was replaced with Gbenga Shobo this week.
CBN was not pleased with Adeduntan's exit, describing it as a removal. Adeduntan had six months left before his tenure ends in December, but was replaced months before.
The apex bank said the change of leadership didn't get approval from the regulator. This was contained in a leak memo CBN sent to First Bank.
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First Bank MD position is six years each, while the longest approved by CBN is 10 years, but Adeduntan didn't complete any, leading to the apex Bank intervening and seeking explanation.
"The attention of the Central Bank of Nigeria (CBN) has been drawn to media reports that the Board of Directors has approved the removal of the current Managing Director of the bank, Dr. Sola Adeduntan, and appointed a successor to replace him.
"The CBN notes with concern that the action was taken without due consultation with the regulatory authorities, especially given the systemic importance of First Bank Ltd.”
It added that:
"Given that the tenure of Dr. Adeduntan is yet to expire and the CBN was not made aware of any report from the Board indicting the Managing Director of any wrong-doing or misconduct, there appears to be no apparent justification for the precipitate removal.”
Why is CBN concerned about Adeduntan's exit?
According to the central bank, the change occurred at a period the bank was under regulatory forbearance. CBN had provided liquidity support to aid First Bank in its operation, so it felt the bank should have informed it before making the changes.
“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.” CBN stated.
CBN threatens disciplinary action
The letter conveyed a threat of disciplinary action against First Bank, as CBN seek an explanation as to why the media was informed before the regulatory body of the financial industry.
"In light of the foregoing, you are required to explain why disciplinary action should not be taken against the Board for hastily removing the MD/CEO and failing to give prior notice to the CBN before announcing the management change in the media.”
In some quarters, the threat from CBN or intervention is tied to First Bank's support of Flutterwave, a Fintech firm that was used as a capital source during the EndSARS protest against Police brutality in Nigeria in October 2020 - the protest led to deaths and injury as Soldiers shot into the peaceful protesters.
Meanwhile, Legit.ng had earlier reported that the chairman of Champion Brew, Elijah Akpan, projected the recovery rate of Nigeria's gross domestic product this year.
Akpan said Nigeria's economy will rise by 1.7% to 2.0% due to increased economic activity and some improvements in the oil market which has been on a recovery path since April's crash.
He also projected that the Central Bank of Nigeria will tighten monetary policy in the second or third quarter of this year.