CBN, Union Bank and Bad Faith

 Wale Fakorede

Recently, two articles were published in multiple media outlets, both print and digital, about Union Bank of Nigerian (UBN) and the recent Federal High Court judgment.

One was entitled: “Union Bank: How controversial transactions led to CBN takeover”, while the other was entitled “Audit links multi-billion naira abuse to old Union Bank management”.

As a lawyer, I naturally became curious as both articles were published at the same time in different newspapers by two different authors. However, the contents were almost identical. I doubt it is a coincidence. Or maybe, both authors had a telepathic subliminal connection that psychologists across the world will need to study. As we think about this journalistic miracle, let us unpack the facts of the matter.

In any case, what were these articles about if not to woodhink and deceive the public?  The articles were written even when the Central Bank of Nigeria (CBN) which the judgment was against has filed an appeal against the judgment. So why the attempts to misrepresent facts?

A judgment by the Federal High Court (FHC) nullified the sacking of the former Board and Management of UBN by the CBN and declared the CBN’s actions were in bad faith. This is a landmark judgement. Furthermore, the judgement instructed the CBN to immediately restore the sacked Board and Management and also awarded $190 million to the shareholders. The CBN immediately responded by filing an appeal and requested for a “Stay of execution”. For the appeal, the CBN sacked some of its lawyers and appointed over 15 SANs.

I felt professionally compelled to fully grasp the issues that warranted this judgement and subsequent reaction. I obtained and read the 110-page Certified True Copy (CTC) of the FHC judgement and here is what I elicited:

Firstly, Titan Trust Bank (TTB), established in 2018 by TGI group via two subsidiary entities, Luxis International and Magna International, acquired UBN in 2022 from Atlas Mara and Union Global Partners Ltd, both UK based private equity groups (UBN’s owners on record).

I found this interesting as the general belief was CBN and AMCON sold UBN to TTB. The second discovery was TTB funded this acquisition using a mixture of equity from TGI and a loan from Afrexim Bank.

In the court records, there are documents that showed that immediately after acquiring UBN, TTB commenced the process of merging both banks and also sought CBN’s approval to create a Holding Company (HoldCo) similar to First HoldCo Plc and Access Holdings Plc. This HoldCo was to own the merged TTB/UBN entities and also take over the Afrexim acquisition loan. According to the court documents, by December 2023, CBN approved the merger but did not approve the HoldCo.

The shareholders argued this is the reason the Afrexim loan remained in the books of the merged bank. But in last week’s articles, this loan was weaponised to justify the sack of the Board.

In the case author of the articles were not thoroughly briefed on how the crisis started, it stemmed from the CBN’s January 2024 intervention, when it dissolved the boards and management of Union Bank, citing “regulatory non-compliance, corporate governance failure, disregarding the conditions under which their licenses were granted, and involvement in activities that pose a threat to financial stability”.

At the time, the apex bank cited provisions of BOFIA, including non-compliance with licensing conditions, threats to financial stability, failure to adhere to regulatory directives, and undercapitalisation. It subsequently appointed interim management teams and initiated recapitalisation and restructuring programmes as part of broader regulatory interventions in the banking sector.

The Federal High Court set aside the actions of the CBN on various grounds, including denial of the Union Bank’s directors their right to fair hearing.

On the issue of fair hearing, the court held that the applicants’ fundamental rights were breached, noting that they were sanctioned without being allowed to respond to allegations arising from a purported special examination of the bank.

The judge found that the applicants’ shareholding was reduced from 100 per cent to 40 per cent and that they were excluded from participating in the recapitalisation exercise without legal justification, describing the actions as indicative of bad faith.

Although the CBN defended its intervention as part of its prudential oversight, citing severe financial distress at the bank—including a negative capital adequacy ratio, a capital shortfall exceeding N224 billion, and a high non-performing loan ratio—the court held that such regulatory powers must be exercised strictly within the confines of the law.

On jurisdiction, the court ruled that Section 51 of BOFIA does not shield the CBN from judicial review where it acts outside its statutory powers. It also held that the actions of the CBN-appointed board were subject to review, describing them as agents of the CBN. It went further to dismiss procedural objections raised by the respondents, holding that the applicable rules of court were directory and not sufficient to defeat the suit.

The court also found that the applicants suffered a “continuing injury,” noting their exclusion from management and decision-making processes between January 2024 and December 2025.

On damages, the court acknowledged that the respondents admitted the applicants invested $190 million in the bank but declined to award additional claims in the absence of oral evidence.

For many observers and industry players, the red flag was how can you approve a merger today and sack the Board tomorrow? The judge asked the same question in his judgement. Another red flag was a few weeks after taking over, the CBN appointed Managing Director wrote to the CBN stating that she had put the HoldCo process “on hold until further notice”. To me, this appears like a classic case of setting up a robbery operation and tipping off the police at the same time.

The forensic report described in the recent articles implied that the Afrexim loan was the genesis of CBN’s actions. But from what I have read, I can only conclude that the loan remained in the books of the bank because the CBN refused to approve the HoldCo or the numerous requests by the shareholders to pay down the loan. In any event, there was no evidence in any court submission by the CBN, written or verbal, that showed UBN was a threat to financial system stability.

This takes me to Page 104 and 105 of the judgement, where it explicitly states the CBN did not submit any “examination report” to the court as evidence to support its actions. The judge said the CBN could not conduct a Special Examination “in the air” buttressing the claim by the former Board of Directors that there was no special examination of the bank at the material time.

Another interesting issue I came across in my review was the CBN’s attempt to sell 60% of the bank without the knowledge or approval of the existing shareholders. On page 105 of the judgement report, the judge said this action showed “bad faith” and “breach” of shareholders “fundamental rights”.

After thoroughly reviewing the court documents, in my professional and objective opinion, I do think there is more to CBN’s action than meets the eye. I am left with more questions than answers.

Why did the CBN not conduct the mandatory and legally required examination before sacking the UBN Board led by Mr. Farouk Mohammed Gumel? Why were the forensics conducted after the dissolution of the Board and not before? Conducting forensics after the fact and using it as the basis for regulatory intervention is the same as putting the cart before the horse. In fact, how did a confidential forensic report of the CBN end up in the newspapers at a time the Apex Bank was seeking to reassure the public that the bank was safe?

Why did CBN try to forcefully dilute the core shareholders? Why did the CBN-appointed Board withdraw the application to set up a HoldCo?

Interestingly, I checked the audited financials of UBN and discovered that the bank was profitable as at December 2023, and could not therefore have been a bank going down the hill at the time of the CBN intervention in January 2024.

This was the biggest indication that there was more to this ‘regulatory intervention’ than the CBN is willing to tell the public. In view of these observations, my final question is, whether this is an act of someone actually trying to take over the bank through the back door?

I will conclude by quoting page 103 of the judgment where the judge said “Bad faith cannot be seen with the eyes. It can only be inferred from the facts of the case.”

As it stands, subject to appeal, the court’s opinion is that the CBN’s actions were made in bad faith and breached the rules of natural justice.

•Fokorede is a lawyer based in Lagos