N77bn First Bank Loan: Why Otudeko May Forfeit Honeywell Flour Mills To AMCON

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Nigerian business mogul and Chairman of Honeywell Group, Dr. Oba Otudeko risks the forfeiture of his company and other assets of interest to Asset Management Corporation of Nigeria (AMCON) over an alleged breach of corporate contract in securing a loan said to be up to the tune of N77 billion from First Bank.

The business mogul, who until Thursday served as the Chairman of the First Bank Nigeria (FBN) Holdings PLC, the holding company which owns First Bank was given a 48-hour ultimatum by the Central Bank of Nigeria (CBN) to repay the loan he reportedly obtained from First Bank.

According to reports, Otudeko-owned Honeywell Flour Mills reportedly obtained the sum of N77 billion from First Bank. It was reported that his company had paid N40bn of the loaned sum. However, the apex bank had expressed concerns over the issuance of such insider’s loan to the company owned by Otudeko.

According to the CBN, First Bank might not have performed due diligence regarding the collateral agreement with Otudeko’s company before granting the credit facility

A memo dated April 26, 2021, issued by the CBN claimed Otudeko’s Honeywell Flour Mills allegedly got special treatment to get the said loan from First Bank.

In the memo, the apex Bank had stated that there was no legal/binding documents signed between the two parties regarding the collateral, of which will allow First Bank to claim the collateral should the loanee fails to repay the loan.

Following the development, the CBN directed the business mogul to repay the said loan in 48 hours which elapsed on April 28. The CBN had also threatened to take appropriate regulatory measures on Otudeko and First Bank, should the former fail to repay the loan within the stipulated deadline.

In the same vein, the CBN had also directed First Bank to divest its interests in Honeywell Flour Mills Group and Airtel Nigeria Ltd, which are both chaired by Otudeko, within 90 days.

According to the CBN, the order is in relation to another bank loan involving Ecobank, where Otudeko had used some Airtel shares as collateral.

In 2013, a N5.5 billion loan facility was reportedly granted to Oba Otudeko’s Honeywell Flour Mills by Ecobank. The loan facility has since become a subject of litigation as the case is still pending at the Supreme Court.

According to reports, Otudeko’s Airtel shares were said to have been used as collateral for Honeywell’s Ecobank loan. In an alleged breach of corporate governance, Otudeko again used the same Airtel shares as well as some Honeywell assets he secured Ecobank’s loan with, to also get credit facility from First Bank, reports said.

The development comes on the heels of an ammendment bill recently passed by the Senate, further empowering AMCON to recover bad loans acquired from the commercial banks in the country.

AMCON was established on July 19, 2010 with the aim of reviving the financial system by efficiently resolving the non-performing loan asset of the banks in Nigeria.

The newly amended AMCON’s Act states that the agency has power to take possession, manage, or sell all properties traced to a debtor, whether or not such assets or properties have been used as collateral in obtaining the loan.

The amendment bill gives the agency to charge the debtors/Obligors to a special credit tribunal established under the Banking and Other Financial Institution Act (BOFIA) 2020.

Following the instruments of the bill and the directive of the CBN, AMCON may trigger a takeover of the Honeywell Nigeria PLC as well as other assests owned by Otudeko if he fails to repay the loans during the stipulated time.

The New Diplomat had reported that the CBN had sacked Otudeko as Chairman of FBN Holdings PLC and other board members from their respective positions. Also, Mrs. Ibukun Awosika was sacked as Chairman of First Bank Limited alongside the entire members of the bank’s board.

Following their ouster, CBN Governor, Godwin Emefiele named Remi Babalola as the new Chairman of First Bank, while Tunde Odukale will now chair the FBN Holdings. Dr Sola Adeduntan, who had been earlier removed as the Managing Director of the bank was also reinstated.

According to Emefiele, while making the announcement the directive is imperative to protect depositors at the bank.

He further explained the decision was aimed at ensuring financial stability at West Africa’s premier bank.

As of the time of this reporting, neither Otudeko nor First Bank has officially reacted to the corporate governance issues raised by the CBN, Thursday, leading to an overhaul of the bank’s board and the ensuing controversies.

Abiola Olawale
Abiola Olawale
'Dotun Akintomide's journalism works intersect business, environment, politics and developmental issues. Among a number of local and international publications, his work has appeared in the New York Times. He's a winner of the National Youth Service Corps (NYSC) Award. Currently, the Online Editor at The New Diplomat, Akintomide has produced reports that uniquely spoke to Nigeria's experience on Climate Change issues. When Akintomide is not writing, volunteering or working on a media project, you can find him seeing beautiful sites like the sandy beaches that bedecked the Lagos coastline.

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