The Central Bank of Nigeria (CBN), in January 2024 sacked the boards and management of Keystone, Polaris and Union banks, citing infractions ranging from corporate governance failure to involvement in activities that pose a threat to financial stability.
They were promptly replaced by CBN appointed interim management.
The dissolution of the boards of the affected banks was part of the implementation of Jim Obaze report of the Special Investigator on the Central Bank of Nigeria (CBN) and Related Entities by President Bola Tinubu.
CBN also warned that it may revoke the licence of any bank if the bank fails to fulfil or comply with any condition to which the licence was granted or if the bank is involved in a situation that is a threat to financial stability.
Since January 11, 2024, the banks have not had the privilege of being run by the full compliments of the boards and management, but, under the CBN interim management, comprising managing and executive directors.
With two, Keystone and Union of the three embattled banks, now under the full grips of the federal government, concerns are being raised on the moral burden of expending public funds being used on them.
Similarly, there is disquiet in the industry over their ability to meet up with the new capital requirements, giving the alleged holes in the finamces of the institutions ,
without forbearance from CBN.
According to an analyst, who pleaded for anonymity, the nationalization of banks with public funds, especially in the context of Nigeria’s past experiences, raises several concerns.
Citing economic implications, he said
“Nationalization can lead to a loss of investor confidence, potentially causing a decline in foreign investment and destabilizing the economy. Additionally, the use of public funds to bail out banks can create a moral hazard, encouraging reckless behavior among bank managers.
The takeover of Union and Keystone banks and possibly Polaris, by the government may provide temporary stability, but it also raises questions about the long-term viability of these institutions. The government’s involvement may lead to a lack of accountability and transparency, potentially creating an environment conducive to the reasons advanced by CBN for sacking their boards and management in the first place.”
Speaking further, he said that his fears are bone out of the country’s past experiences with nationalization, which he alleged was marked by inefficiencies, corruption, and poor management.
“Nigeria’s banking sector has undergone several reforms, including the 2005 recapitalization, which had mixed results. The current nationalization effort must learn from these past experiences to avoid repeating the same mistakes. This will require decisive action of either to sell or merge them should be of essence” another stakeholder said.
Proferring solution as a way out, Lagos based banker said, “To mitigate the risks associated with nationalization, the government, through CBN must ensure transparency, accountability, and good governance in the management of these banks. This includes implementing robust regulatory frameworks, promoting competition, and encouraging private sector participation in the banking sector.”
Court Judgement That Made FG Legal Owners of Keystonebank
The Special Offences Court sitting in Ikeja, Lagos, on Tuesday admitted a former Managing Director of the Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, to bail in the sum of N50m with two sureties.
The court also convicted and wound up a company, Sigma Golf Nigeria Limited and ordered the forfeiture to the Federal Government, all rights, title and interest of the company in Six Billion, Two Hundred and Fifty Million (6,250,000,000) units of Keystone Bank Limited’s ordinary shares of 1.00 each.
Justice Rahman Oshodi handed down this judgment which formed part of the terms of a plea bargain agreement between the company and the Economic and Financial Crimes Commission (EFCC) following the guilty plea of the company through its Chairman, Umaru Modibbo, after his arraignment in court on Tuesday.
Modibbo is also the Founder of Sigma Pensions Nigeria Ltd. Following an amended charge, his company, Sigma Golf Nigeria Ltd was arraigned by the EFCC before the judge on a six-count charge alongside the former AMCON boss for the offence of conspiracy, stealing and transfer of property derived from an illegal act.
The EFCC said AMCON funds to the tune of N20bn were converted through Heritage Bank to the use of a company, Sigma Golf Nigeria Ltd for the acquisition of Keystone Bank.
While Kuru pleaded not guilty to the offences, Sigma Golf through its Chairman pleaded guilty.
After the plea of both defendants, the EFCC through its lead prosecutor, Rotimi Oyedepo (SAN) then informed the court that it had reached a plea bargain agreement with the company.
Oyedepo asked the court to adopt the terms of the agreement as the judgment of the court.
After convincing itself that the agreement was voluntary and done in the interest of justice, the court adopted it as its judgment.
Part of the judgment read:
“That upon the conviction of Sigma Golf Nigeria Ltd, all its rights, title and interest in the one (1) unit of the Keystone Bank Limited’s ordinary shares allotted to Alhaji Umaru Hamidu Modibbo, the current Chairman of the company, shall forthwith also be forfeited to the Federal Government of Nigeria represented by the Economic and Financial Crimes Commission (EFCC).
“That in respect of the facts and circumstances of the instant case, the Complainant, the Federal Republic of Nigeria, agrees not to pursue criminal charges both now and in the future against Alhaji Umaru Hamidu Modibbo.
“That Sigma Golf Nigeria Limited and its Chairman, Alhaji Umaru Haridu Modibbo, agree to fully cooperate with the Prosecution in any ongoing or future investigations related to this matter, including providing truthful testimony as required.”
After this judgment, the court listened to the bail application of the former AMCON MD, Ahmed Kuru.
Justice Oshodi noted that the offence which carries a seven-year jail term was ordinarily bailable. With no objections from the EFCC, the court declined to admit the defendant to bail on self-recognizance but admitted him to bail in the sum of N50m with 2 sureties who shall swear to an affidavit of means before the court.
Part of the bail conditions also include that the sureties shall be screened and shall produce evidence of payment of tax in the last three years.
The EFCC is to notify the Nigeria Immigration Service of the seizure of Kuru’s passport by the registrar of the court
In the meantime, the court has temporarily released Ahmed Kuru to his lawyer Olasupo Shasore (SAN) pending the perfection of his bail conditions.
Justice Oshodi then adjourned till March 7th and April 16 & 17th for commencement of trial.
Response From Keystonebank
The bank on Tuesday, in a statement posted on its X handle, said the Federal Government has taken full ownership of Keystone Bank.
It read, “Keystone Bank Limited wishes to clarify media report of a judgement by the Lagos State Special Offences Court, sitting in Ikeja, Lagos, on Tuesday, February 11, 2025, regarding the status of the former shareholders of the bank: Sigma Golf Nigeria Limited and Alhaji Umaru H. Modibbo.
“Recall that on January 10, 2024, the Central Bank of Nigeria (CBN) announced the dissolution of the previous Board and Management of the Bank for corporate governance breaches. The CBN followed this action with the appointment of a new Board and Management for the Bank.
“Subsequently the Federal Government through the EFCC filed a court action at the Lagos State High Court, Ikeja, against the former owners challenging the acquisition of the bank. At the sitting of the court today, February 11, 2025, the court ordered the forfeiture of the shares of the Bank previously held by the shareholders in favour of the Federal Government of Nigeria. The implication of this judgment is that Keystone Bank Limited is now fully owned by the Federal Government of Nigeria.”
The bank described the development as a “significant milestone in our journey,” the bank said the move is “paving the way for a seamless recapitalization process”.
“With this clarity, we are well-positioned for sustained growth, stronger partnerships, and enhanced profitability. Keystone Bank continues to strengthen its balance sheet while delivering exceptional value to its teeming stakeholders,” the statement read.
“The bank maintains a strong financial position, consistently fulfilling all its obligations and adhering to all regulatory requirements. We assure our customers that the bank remains safe, healthy, strong, and resilient.”
Analysts are waiting with bated breathe for early resolution of moral burden of continuing holding on to these financial institutions politically, through forbearance packaging before putting them on the sales block or mergers and acquisitions by the existing institutions to be able to meet the 2026 deadline for recapitalization
