Union Bank of Nigeria Faces Controversial Federal Court Ruling
Wale Fakorede
Recent articles in various media outlets have brought attention to the Union Bank of Nigeria (UBN) and a significant ruling by the Federal High Court. One article entitled “Union Bank: How a controversial deal led to CBN takeover” discusses the circumstances surrounding the Central Bank of Nigeria (CBN) intervention, while another piece, titled “Audit links old Union Bank management with multi-billion naira fraud,” raises questions about UBN’s governance.
As a lawyer, I was intrigued by the simultaneous publication of these two closely related pieces by different authors. While the similarity in content could be seen as coincidental, it does raise questions about journalistic integrity. Are these articles designed to mislead the public? It is critical to analyze the facts at stake, especially given that the CBN has appealed against the court’s ruling.
The Federal High Court’s decision not only overturned the CBN’s removal of UBN’s former directors but also characterized the CBN’s actions as malicious. This landmark ruling mandated the immediate reinstatement of the dismissed board and awarded $190 million to shareholders. In response, the CBN promptly filed an appeal and sought a “stay of execution,” while also restructuring its legal team to include over 15 Senior Advocates of Nigeria (SANs).
To comprehend the complexities surrounding this legal battle, I reviewed a certified copy of the 110-page court decision. The ruling revealed that Titan Trust Bank (TTB), established by TGI Group in 2018, acquired UBN from its previous owners, UK-based private equity groups Atlas Mara and Union Global Partners Limited, in 2022. This challenges the prevalent belief that the CBN and the Asset Management Corporation of Nigeria (AMCON) were the ones who finalized the sale.
Upon acquisition, TTB reportedly initiated plans to merge with UBN and sought CBN approval to form a holding company (HoldCo) analogous to First HoldCo Plc and Access Holdings Plc. Although the CBN approved this merger by December 2023, the establishment of HoldCo itself did not materialize. Critics suggest this is a key reason why the Afrexim Bank loans remain on the books of the combined entity, casting further doubt on the CBN’s motivations for intervention.
The conflict traces back to January 2024, when the CBN dissolved UBN’s management due to alleged regulatory violations and corporate governance failures. Back then, the apex bank invoked provisions of the Bank and Other Financial Institutions Act (BOFIA), arguing that UBN posed a significant threat to financial stability. As a part of this intervention, an interim management team was appointed, accompanied by a broader recapitalization and restructuring initiative within the banking sector.
The court ruled that the CBN’s actions infringed on the directors’ rights to a fair hearing. It noted that the directors were not afforded an opportunity to address allegations during a special investigation, which significantly impacted their rights as shareholders. The court further found that the abrupt reduction of one director’s shareholding from 100% to 40% reflected not only bad faith but also a violation of fundamental rights. Though the CBN claimed its actions were a necessary exercise of regulatory authority, the court emphasized that such powers must be exercised strictly in accordance with the law.
Furthermore, the CBN’s handling of the situation raises many questions. For instance, the court pointed out that the CBN had failed to present any solid evidence—such as an investigation report—to support its actions against UBN. The judge went so far as to argue that conducting special inspections after the board had already been dismissed undermined the legality and rationale for the CBN’s intervention. Additionally, the court flagged the CBN’s attempt to proceed with the sale of 60% of UBN’s shares without consent from existing shareholders as overtly malicious.
A review of UBN’s financial status as of December 2023 shows the bank was, in fact, profitable, contradicting the CBN’s claims of financial instability. Such findings suggest that the purported regulatory intervention may have ulterior motives beyond mere compliance with banking regulations. Reflecting on these observations, one cannot help but wonder whether this could be a strategic maneuver for a covert takeover of the bank.
As the situation unfolds, all eyes are on the impending appeal and what it might reveal about the CBN’s original motivations. The court has already stated, “Maliciousness is invisible; it can only be inferred from the facts of the case.” Whether the CBN can substantiate its claims in light of the court’s thorough scrutiny remains to be seen.
Fakorede is a lawyer based in Lagos.
