The Federal High Court in Abuja has struck out a N374 billion agricultural loan suit against Keystone Bank by the Ginger Growers, Processors, and Marketers Association of Nigeria (GGPMAN).
The suit, which revolved around the Anchor Borrowers’ Programme (ABP), was dismissed due to jurisdictional issues.
Justice Obiora Egwuatu struck out the association’s suit, which represented 31,309 farmers.
The claims against Keystone Bank ranged from the non-disbursement of N8,679,289,368.92 to N335,437,200,000 in entitlement claims and N30 billion as general damages for the alleged breach of the banker-customer relationship, according to Nairametrics’ exclusive review of the court documents.
Nairametrics reports that the Anchor Borrowers’ Programme (ABP) of the Central Bank of Nigeria (CBN), established on November 17, 2015, to create economic linkages between smallholder farmers and anchor companies, has been facing significant repayment issues from beneficiaries, leading to a number of litigations.
Ginger Farmers’ Claims
- According to court documents exclusively seen by Nairametrics, the plaintiffs, a duly registered cooperative society with over 31,190 members—all farmers in the ginger sector—had applied to participate in the ABP of the CBN and nominated Keystone Bank as their Participating Financial Institution.
- The association claimed that Keystone Bank, in line with ABP guidelines, applied to the CBN on their behalf for the release of the approved loan facility.
“The CBN released the approved loan sum of N8,679,289,368.92 to Keystone Bank for onward disbursement to the plaintiffs within 10 working days in March 2020. However, the commercial bank only notified the plaintiffs on July 29, 2020,” the plaintiffs’ lawyer, Eko Ejembi Eko, SAN, submitted.
- He accused Keystone Bank of failing to provide any reason for withholding the plaintiffs’ funds and of refusing to disburse the loan facility within the stipulated 10 working days, despite several demands.
- The senior lawyer further alleged that the bank, without notifying his client, had repatriated the loan facility granted under the Anchor Borrowers Programme to the CBN after allegedly “utilizing the funds for its own pecuniary purposes for more than five months.”
- Aggrieved by their losses and the “unjust, arbitrary, and mischievous acts” of the bank, his client filed the suit seeking reliefs totaling over N370 billion against Keystone Bank.
Some of the reliefs sought include:
“A declaration that the plaintiffs were entitled to the prompt release of the agricultural loan facility granted to them by the CBN under the Anchor Borrowers Scheme.”
“A declaration that Keystone Bank converted for its own use the sum of N8,679,289,368.92 it received from the CBN for the sole and exclusive use of the plaintiffs under the Anchor Borrowers Programme, thereby depriving them of access to the funds.”
Keystone Bank’s Response
- Responding to the association’s claims, Keystone Bank’s lawyer, Dr. Sonny Ajala, SAN, argued that the Anchor Borrowers Programme guidelines were “mere guidelines” lacking statutory and contractual weight and, therefore, had no binding legal force.
“Effectively, it is commercial banks such as Keystone Bank that act as the real and ultimate lenders to participating farmers under the Anchor Borrowers Programme,” he submitted in court documents exclusively seen by Nairametrics.
- He admitted that Keystone Bank, in an offer letter dated September 2, 2020, had offered a loan of N8,679,289,368.92 to the plaintiffs, which they accepted on the same date without reservations.
“The offer letter dated September 2, 2020, for the loan of N8,679,289,368.92, which was accepted by the plaintiffs, grants Keystone Bank the prerogative to withhold the disbursement of the loan and, upon demand by the Central Bank of Nigeria, to repatriate the loan amount to the CBN forthwith,” Ajala argued.
Ajala further stated that on November 11, 2020, the CBN requested the repatriation of the loan, and Keystone Bank swiftly complied.
- The senior lawyer also challenged the court’s jurisdiction to hear the case, arguing that the plaintiffs failed to issue and serve a pre-action notice to Keystone Bank, as required by the binding contractual instrument (offer letter) dated September 2, 2020.
- A pre-action notice is a letter issued to a party informing them of an impending lawsuit, giving them time to prepare for a defense or negotiate an out-of-court settlement.
- However, the association’s counsel argued that a pre-action notice was immaterial in this case, as long as any other letter sent to Keystone Bank was not intended to mislead.
CBN Weighs In
- On behalf of the CBN, Dr. U.Y. Hassan confirmed that the loan was requested and disbursed to Keystone Bank on July 15, 2020, for onward distribution to the ginger farmers.
- He added that after the loan was disbursed to Keystone Bank, the bank later informed the CBN of its non-disbursement and requested to repatriate the loan sum.
“Upon receipt of this letter, the CBN, in line with its role in coordinating the programme and in accordance with its contractual obligations, accepted the repatriation of the loan sum by Keystone Bank,” Hassan stated.
Court’s Resolution
- Delivering judgment on March 10, 2025, in suit number FHC/ABJ/CS/350/2024, Justice Egwuatu ruled in favor of Keystone Bank, agreeing that a pre-action notice was a mandatory requirement before a suit could be deemed competent.
“It is a precondition that must be complied with. Any action commenced in breach of this requirement would be incompetent,” the judge held.
The judge stressed that while the requirement of a pre-action notice can be waived, Keystone Bank had insisted on being served and raised an objection in time.
He held that the plaintiffs’ failure to issue a pre-action notice makes their suit incompetent.
“Where a court has declined jurisdiction, it also lacks the power to take any further action. A court without jurisdiction cannot make further orders or take any steps beyond declaring its lack of jurisdiction. Any action taken thereafter is a nullity,” he stated.
Consequently, the judge struck out the suit against Keystone Bank for lack of jurisdiction.
Context
Nairametrics reports that as of late 2024, the ABP had disbursed a total of N1.121 trillion, with only N670.47 billion recovered in principal repayments and N5.79 billion in interest payments.
This left an outstanding amount of N450.90 billion at the time, with an additional N354.5 billion marked as overdue, leading to a portfolio default rate of 31.6%.
The ABP shares the risk between the CBN and the Participating Financial Institutions (PFIs), with each bearing 50% of the exposure.
With over 4.5 million beneficiaries, the programme remains in recovery mode, with relevant authorities pursuing legal action and other measures to address repayment challenges.
The CBN Governor, Yemi Cardoso, has repeatedly criticized intervention funds implemented under the leadership of his predecessor, Godwin Emefiele, arguing that they were not properly executed.
What This Means
The verdict underscores the power of the courts to intervene in loan disputes between financial institutions and aggrieved parties.
For parties in a contractual dispute, serving a pre-action notice is a crucial requirement to ensure that a case is deemed competent and can be heard by the court.
