Central Bank of Nigeria Challenges Court Ruling on Union Bank Acquisition
The Central Bank of Nigeria (CBN) has officially appealed a recent judgment from the Federal High Court in Lagos, which nullified its acquisition of Union Bank of Nigeria. The court’s ruling also mandated the reinstatement of the bank’s previous directors.
On March 25, Justice Chukwujekwu Aneke issued a verdict stating that the CBN acted beyond its statutory authority by dissolving Union Bank’s board and management.
In light of this ruling, the CBN has assembled an experienced legal team led by Senior Advocate of Nigeria (SAN) Mr. Yusuf Ali, along with notable members including Kemi Pinheiro, Tunde Fagbohunlu, Uche Val Obi, and Chukwudi Enebeli.
The appeal, filed on March 26, puts forward 11 grounds that comprehensively challenge the lower court’s decision.
The CBN contends that it operated within its statutory rights as defined under the Central Bank of Nigeria Act and the Banks and Other Financial Institutions Act, 2020 (BOFIA) when it intervened in Union Bank’s affairs, which were marked by severe financial distress.
The evidence presented to the trial court indicated that Union Bank was experiencing a negative capital adequacy ratio, a capital deficit exceeding 224 billion naira, and elevated levels of non-performing loans. According to the CBN, these conditions justified the need for regulatory intervention to maintain the integrity of the banking system.
The bank further argues that Section 34 of BOFIA grants the governor the authority to remove directors and other officials from banks in precarious conditions. It maintains that Section 51 offers protections for actions taken in good faith while fulfilling statutory responsibilities.
According to the CBN, the lower court misinterpreted these provisions, which they believe led to a miscarriage of justice.
The apex bank asserts that the ruling improperly invalidated the decisions and actions of the board-appointed management, branding those acts as illegal, reprehensible, and unconstitutional, without establishing any legal grounds for reinstating the former directors.
Additionally, the CBN has submitted a petition for a stay of execution regarding the Federal High Court’s ruling while the appeal is pending. This motion seeks to prevent the reinstated directors and other defendants from assuming control of Union Bank, interfering with its management and operations, holding board or management meetings, or altering its governance structure.
The petition also seeks to prohibit the parties involved from engaging in any media-related activities that could further destabilize the bank, thereby maintaining the status quo until the appeal is addressed.
The respondents in the appeal include Titan Trust Bank Limited, Luxis International DMCC, Magna International DMCC, alongside several former directors of Union Bank, including Bayo Adeleke and Yetunde Oni, who initially filed the complaint disputing the CBN’s intervention.
In a supporting affidavit for the stay application, the CBN cautioned that enforcing the judgment could disrupt Union Bank’s governance and operations, erode public trust in the banking sector, and pose systemic risks. The bank emphasized that the appeal raises significant legal questions about its regulatory authority and that failing to issue the injunction could result in an invalidation of the appeal.
Preserving the status quo is deemed vital for maintaining stability in the banking sector and ensuring that appellate courts can effectively adjudicate the case, which may have profound implications for regulators navigating the Nigerian Banking Act.
