“Hostile Take Over”: CBN Limits Acquisition of Shares in First Bank, Access Bank, Others to 5 Per Cent

• The Central Bank of Nigeria has come up with new regulatory guidelines to limit controlling shares in financial holding companies
• The new guidelines restrict investors to 5% controlling stakes in financial holding banks in Nigeria
• CBN said investors seeking to own controlling stakes of 5% or above in financial holding companies must obtain prior approval

The Central Bank of Nigeria has restricted the acquisition of controlling stakes in financial holding firms in Nigeria to 5% in new corporate governance guidelines released on Friday, July 14, 2023.

The apex bank said this in a new circular to all commercial banks, merchant, non-interest, and payment service banks, including financial holding companies, titled ‘Corporate Governance Guidelines’ signed by the Director of Financial Policy and Regulation Department, Chibuzo Efobi.

New guidelines restricts investors to 5% in financial holding firms

The new guideline stated that investors would need approval from CBN before acquiring majority stakes in holding companies.

According to Section 19 of the new guideline, which deals with the protection of shareholders, the bank said, “Except where prior approval of the CBN is granted, no individual, group of individuals, their proxies or corporate entities shall own controlling interest in more than one FHC.

CBN said:

“Except with the prior written approval of the CBN, no FHC or any of its directors, shareholders or agent shall enter into an agreement which results in a change in the control of the FHC, the transfer of shareholding of five per cent and above in the FHC; and an increase in shareholding to five per cent or more in the FHC.

“Provided that CBN’s prior approval and No Objection shall be sought and obtained, before any acquisition of shares of an FHC by an investor (including through the capital market), that would result in equity holding of five per cent and above the sale, disposal or transfer of the whole or any part of the business of the FHC; the acquisition or merger of the FHC; the reconstruction of the FHC; or the employment of a management agent, management by or transfer of its business to any such agent.”

Oba Otudeko’s shares in First Bank Holding Plc in jeorpardy

The section also added that subsidiaries of a Financial Holding Company (FHC) were prohibited from acquiring shares in its FHC and other subsidiaries within the group.

The apex bank noted that the new rules apply to commercial, merchant, non-interest, and payment service banks in Nigeria and Corporate Governance Guidelines for Financial Holding Companies in Nigeria.

The new CBN guidelines come amid a row in First Bank Holding Nigeria Limited following Oba Otudeko’s acquisition of 13.3% controlling stakes.

The move prompted Ecobank to ask FBNH shareholders to reject Otudeko as the largest shareholder in the bank.

First Bank investors lose N61bn in 2 days amid Otudeko, Ecobank dispute

Legit.ng reported that the ongoing legal dispute between Ecobank Nigeria Limited and former Chairman, FBN Holdings Plc, Oba Otudeko, appears to be taking a toll on the latter.

Report indicates that the holding company in two days witnessed a 13.59% decline in its shares price.

On Wednesday, July 12, 2023, shares of FBN Holdings declined by 10%, representing N63 billion in total investment by the shareholders of the company. The share price closed at N19.35.

Source: Legit.ng