The loan dispute between General Hydrocarbons Limited (GHL) and First Bank of Nigeria Limited (FBN) has escalated into a court battle following GHL’s request for a fresh $53 million facility to finance the development of Oil Mining Lease (OML) 120.
This is according to information gleaned from a leaked letter purportedly signed by Nduka Obaigbena as well as court documents seen by Nairametrics.
The disagreement has triggered allegations, lawsuits, and freezing orders, deepening tensions between both parties.
Sources close to the matter informed Nairametrics that officials at First Bank have refused to honor the new loan request, citing concerns over GHL’s utilization of previous loans disbursed for the same project.
This refusal, coupled with growing mistrust, culminated in a Mareva injunction court ruling that temporarily froze GHL’s assets across multiple financial institutions in favor of FBN’s outstanding debt claims.
Background
According to the leaked letter addressed to the Central Bank Governor (CBN), Yemi Cardoso, the conflict stems from an agreement between FBN and GHL initiated during the tenure of Oba Otudeko, the former Chairman of FBN Holdings Plc.
- In 2020, GHL entered into a partnership with FBN to develop OML 120 after FBN faced financial exposure from non-performing loans (NPLs) linked to Atlantic Energy.
- Information contained in the letter further reveals the partnership was designed to “revive” FBN’s books, with profits from OML 120 shared to offset the NPLs.
- The letter also claimed that the financing arrangement “helped” FBN “avoid” declaring a massive N302 billion loan loss provision in 2021.
- However, GHL now accuses FBN of reneging on its obligations, including delays in disbursements that led to significant financial and operational setbacks.
The firm claims that FBN declined to perform its obligations under the MOU and the Outstanding Exposure Tripartite Deed, contributing to GHL’s loss of the Blackford Dolphin drill ship for which GHL is currently facing claims exceeding $100 million in arbitration.
The push for fresh loans
The current controversy revolves around GHL’s application for a $53 million loan on 28th August 2024, to continue its drilling and development activities.
- While the facility was initially pre-approved, sources reveal that FBN declined to disburse the funds, citing issues with how GHL utilized previous loans.
- The bank also expressed reservations about further funding, insisting on structural changes in GHL’s management.
- Nairametrics also notes that the timing of the loan request coincided with a slew of board and management changes in First Bank and its parent company, FBN Holdings as the bank implemented several corporate restructurings and repositioning ahead of its recapitalization plans.
Several sources who spoke to Nairametrics suggest the timing is significant, adding that a change in the risk management framework of the bank may have contributed to the decline of the fresh facility demand of GHL.
Mediation efforts
Nairametrics learned that mediators involved in resolving the dispute proposed a significant overhaul in GHL’s leadership, including appointing new Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs).
- However, both parties have yet to agree on these terms, further complicating the resolution process.
- In addition to the managerial restructuring, FBN allegedly proposed the appointment of an Independent Asset Manager under a new Framework Agreement.
- GHL objected, describing the move as an attempt by FBN to take control of its assets, including OML 120, and replace GHL’s management team and operations.
Legal Battle
The disagreement has now spilled into the courts.
- On 30th December 2024, the Federal High Court in Lagos issued a Mareva injunction, freezing GHL’s assets linked to the $225.8 million loan owed to FBN.
- The court order comes amid arbitration proceedings initiated by GHL against FBN’s alleged breach of their agreements.
- GHL’s lawyers argue that the injunction was obtained unlawfully, vowing to challenge its enforcement in court.
- GHL’s lawyers also argue that a subsisting court judgement restrains FBN from taking any step against its OML operations and loan requests.
Meanwhile, the legal tussle continues to delay critical oil exploration and development activities under OML 120.
Related development
In a separate but likely related development, ThisDay Newspaper, owned by Nduka Obaigbena, Chairman of General Hydrocarbons Limited (GHL), reported on its front page that some minority shareholders are purportedly demanding an Extraordinary General Meeting (EGM) to oust FBN Chairman Femi Otedola and Julius B. Omodayo-Owotuga, a Non-executive/Deputy Chief Executive of Geregu Power Plc.
- The relationship between Obaigbena, who is deeply involved in the GHL-FBN dispute, and Otedola, who chairs FBN Holding, has added an intriguing dimension to this unfolding drama.
- Responding to these reports, First Bank issued a statement affirming that it is taking all necessary steps to safeguard the interests of the company and its subsidiaries.
- In a statement obtained by Nairametrics on Thursday, FBN Holdings reassured stakeholders that the ongoing shareholder matters do not impact the group’s operations.
“This matter does not in any way impact the operations of the Company, and all the businesses within the Group continue to provide uninterrupted services to its customers,” the statement read.
Sources within the bank suggest that these related developments may be part of a broader strategy to pressure the bank into conceding to the demands.
Regulators keep mum
As the dispute between General Hydrocarbons Limited (GHL) and First Bank of Nigeria Limited (FBN) intensifies, regulators have remained silent on the matter.
- Despite the high stakes and potential systemic risks to the banking sector, neither the Central Bank of Nigeria (CBN) nor the Asset Management Corporation of Nigeria (AMCON) has issued a public statement addressing the ongoing controversy.
- Sources close to the situation, however, inform Nairametrics that stakeholders are actively mediating to resolve the impasse.
- Efforts are reportedly focused on preventing any fallout that could destabilize the banking sector, given the significant sums involved and the potential impact on FBN’s financial stability.
Nigerians lament on Social media
Meanwhile, social media is awash with discussions about the Mareva injunction and a leaked letter from GHL to the CBN.
- The revelations have sparked widespread debate on the nature of financial transactions that occurred during the tenure of former CBN Governor Godwin Emefiele.
- Many online commentators have suggested that basic corporate governance and risk management processes were overlooked in issuing the loans that led to this crisis.
Critics argue that the situation points to deeper systemic issues within Nigeria’s financial system, with potential lapses in oversight and accountability by financial institutions and regulators alike.
