On the 29th of April, 2021, the Central Bank of Nigeria (“ CBN”), the apex regulatory body for banks and other financial institutions in Nigeria created under the CBN Act 2007 (“CBN Act”),1 announced the removal of all the directors of First Bank of Nigeria Limited (“FBN”) and its holding company, FBN Holdings Plc (“FBN Holdings”). The CBN also re-appointed 14 out of the 21 directors affected by the removal to form a new board of directors for the two institutions and reinstated the removed Managing Director/Chief Executive Officer of FBN (“MD/CEO”), Dr. Adesola Adeduntan.2

This action raises important legal issues, which will be addressed in this article, especially with regards to the regulatory powers of CBN to make decisions concerning the constitution of the board of directors of financial institutions in Nigeria.


There are two essential requirements to be fulfilled before carrying out banking business in Nigeria, which are:

  1. Incorporating a company with the Corporate Affairs Commission (“CAC”), and
  2. Obtaining a banking licence from the CBN.3

These two requirements bring banks under the regulatory purview of majorly the CAC and the CBN.4 The CAC is established by the Companies and Allied Matters Act, 2020 (“CAMA”), and is charged with the responsibility of enforcing the provisions of the Act, which regulates the affairs of all companies duly registered in Nigeria.5 Although all corporate entities registered with the CAC are subject to the provisions of CAMA, there are, however, sector-specific legislations that limit the application of CAMA. In this regard, the CBN Act6 and the Banks and Other Financial Institutions Act, 2020 (“BOFIA”) are examples.

Section 53 of BOFIA provides that the provisions of BOFIA shall apply notwithstanding the provisions of CAMA.7 The implication of this is that where there is any conflict between the provisions of CAMA and BOFIA concerning any bank or any financial institution in Nigeria, the provisions of BOFIA shall prevail.


The appointment and removal of directors of any company are primarily governed by CAMA. Under CAMA, the appointment of directors of a company is done by the shareholders in a general meeting,8 while in the case of a casual vacancy in the board, the appointment of a director to fill the vacancy is done by the board of directors, subject to the approval of the shareholders at the next general meeting of the company.9 In the case of the MD, his or her appointment is done by the board and is not subject to the approval of the shareholders in general meeting.10 There is no requirement for the approval of CAC before a director, including the MD, is validly appointed under CAMA. However, within 14 days after the appointment of director(s) by a company, the company must file returns to CAC using CAC Form 7A.

In the case of banks and other financial institutions as regulated by BOFIA, before the shareholders of any bank can validly appoint a director, the approval of the CBN must be obtained. Specifically, Section 47(1) of BOFIA provides that:

“Every bank shall, before appointing any director, chief executive or management staff of such grade as may be specified from time to time by the Bank (CBN), seek and obtain the Bank's written approval for the proposed appointment”.

In other words, although generally, the shareholders of a bank have the power to appoint the directors of that bank, such appointment is however subject to CBN's approval before it becomes effective.  


The procedure for the removal of directors of corporate entities is well spelt out in Section 288 of CAMA. Briefly, under the section, directors can be removed by ordinary resolution of the shareholders following a special notice given to the shareholders of the proposed resolution for the removal of the director. The director to be removed must be given the opportunity to defend himself either in writing or in person.11

Under BOFIA, the procedure for the removal of directors of banks is not provided, but the Act gives the CBN the power to remove a director or the directors and management of a bank in special circumstances.12


One of the powers conferred on the CBN by BOFIA is the power to order a special examination or investigation of the books and affairs of a bank where, among other things, it is in the interest of the public to do so.13 Where, after an examination, CBN is satisfied that the bank examined is under a ‘grave situation', it can, notwithstanding the provisions of CAMA and the memorandum and articles of association of the bank, remove any director(s) of the bank and appoint another person(s) as director(s) of the bank.14 However, what amounts to a ‘grave situation' is not defined in BOFIA.

The power of the CBN to remove the directors of any financial institution as provided in Section 33 and 34 of BOFIA is further emphasised by the decision of the Court of Appeal in the case of Danson Izedonmwen & Anor v. Union Bank PLC & Anor.15 In that case, following the decision of the CBN removing the directors of Union Bank in 2009 and appointing new directors to take over, some shareholders of the bank commenced an action by originating summons seeking a declaration that the action of CBN in removing and appointing new directors for the bank is void and of no legal effect. The Court of Appeal, upholding the decision of the Federal High Court, dismissed the appeal and held that based on Section 33 and 35 of BOFIA 2004, now Section 33 and 34 of BOFIA 2020, the CBN has the power to remove the directors of a failing bank and appoint new directors to take over the bank.


Having highlighted the circumstances in which CBN can lawfully remove the director(s) of a bank, looking at the surrounding facts behind the removal of First Bank directors and the constitution of another board of directors, has CBN complied with the requirements of BOFIA?

Looking holistically at the content of the CBN Governor's statement on the purported management change of FBN,16 the Governor traced the highlights of significant events concerning First Bank since 2016, when it examined the books and accounts of the bank, and it discovered that the bank was in grave financial condition, as its Capital Adequacy Ratio (CAR) and Non-Performing Loans Ratio had substantially breached the acceptable prudential standards of a Deposit Money Bank (DMB) due to poor corporate governance practices. Following these discoveries, as part of mechanisms to prevent First Bank from entering into legal comatose, among other things, CBN did the following:

  1. Changed the management team and appointed a new MD/CEO, Dr. Adesola Adedutan in January 2016;
  2. Granted regulatory forbearances to enable the bank work out its non-performing loans through provision for write off at least N150 billion;
  3. Granted concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions, and;
  4. Renewal of the forbearances every year between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.

According to the CBN Governor in his statement, although the position of First Bank has improved following the series of actions CBN took, recent examinations show that First Bank is yet to fully recover and be completely free from being termed ‘a failing bank'. The CBN governor cited particularly the issue of insider loans to some members of the board of directors, which remain unpaid. The necessary paragraph is quoted below:

The insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank. The CBN's recent target examination as at December 31, 2020, revealed that insider loans were materially non-compliant with restructure terms (e.g. non perfection of lien on shares/collateral arrangements) for over 3 years despite several regulatory reminders. The bank has not also divested its non-permissible holdings in non-financial entities in line with regulatory directives.

One of the insider dealings recently made the news when the CBN directed Oba Otudeko owned Honeywell Flour Mills, to repay a loan to First Bank within 48 hours from the 26th of April, 2021.17  Oba Otudeko is the former Chairman of FBN Holdings, who was removed by CBN and he also served as the Chairman of FBN until 2010.

On this basis, it can be rightly concluded that CBN acted within the ambit of the law in dissolving the board of directors of First Bank, in the interest of the public, to prevent it from being a failing bank and to protect the interest of the stakeholders.

Apart from the issue of insider dealings, the CBN Governor in his statement also noted that one of the reasons for CBN's decision to dissolve the board of First Bank was the removal and appointment of directors without its prior written approval. Section 47 of BOFIA provides that the appointment of any person as a director in any bank must be with the prior written approval of the CBN. However, contrary to this statutory requirement, FBN, on the 28th of April, removed the then MD/CEO, Dr. Adesola Adedutan, who was appointed by the CBN in 2016 and whose tenure is to end in December 2021,18 and appointed Mr. Gbenga Shobo in his place as the new MD/CEO. The appointment of Mr. Gbenga Shobo was not brought to the attention of CBN, and thus its approval was not given. Meanwhile, in the report given by the then Chairman of First Bank, Ibukun Awosika, the appointment of Mr. Gbenga Shobo was to take effect on that same date, 28th April.19 This is clearly a breach of the provision requiring the prior written approval of the CBN before the appointment of any director in a bank.

Noteworthy, the consequence of appointing a director without CBN's approval as provided in Section 47 of BOFIA is an offence for which the defaulting bank, as well as every officer, are liable to payment of penalty.20 There is nothing in the Section 47 that gives the CBN the power to remove the director improperly appointed. However, from a combined reading of the provisions of Sections 33 and 34 of BOFIA, one of the instances where CBN can order an examination into the affairs of a bank is where the bank has been contravening the provisions of the Act. One of the provisions of the Act is the requirement of CBN's approval before the appointment of any director by a bank. Where a bank fails to do this, the bank has breached the Act and, in such instance, CBN has the intervening power to, among others, remove the directors of such bank and appoint others to act.


The stakeholder theory of corporate governance posits that there are many stakeholders involved in the success or failure of any corporate organisations. Hence, good corporate governance standards must be observed at all times in every corporate entity. In achieving this, especially for banks21 that hold a major position in the economy, it is imperative that the CBN, as the apex regulatory body, takes necessary actions that will prevent a bank from entering into legal comatose. The effect of breaching regulatory obligations by not obtaining CBN written approval prior to the removal of the FBN's MD and appointing another person for the position could destabilize the financial market, erode shareholders and investors' confidence and create panic amongst the depositors. The intervention of the CBN in the board crisis in FBN and FBN Holdings is thus legal and in line with its statutory objective of promoting sound financial system in Nigeria. 


1 Sections 1 and 2 CBN Act.


3 Section 2 of the Banks and other Financial Institutions Act, 2020.

4 Other regulators include the Ministry of Finance and the Nigeria Deposit Insurance Commission.

5 Section 8 CAMA 2020.

6 Section 55 of the CBN Act.

7 Section 55 of the CBN Establishment Act also provides that the provisions of the Companies and Allied Matters Act 1990 or any amendments thereto shall not apply to the Bank.

8 Section 273(1), CAMA 2020.

9 Section 274 CAMA 2020.

10 Section 289(5) CAMA 2020.

11 Longe v First Bank of Nigeria [2010] 6 NWLR (Pt. 1189) 1.

12 Section 34 BOFIA.

13 Section 33 BOFIA.

14 Section 34(1)&(2)(f) BOFIA.

15 (2011) LCN/4919(CA).

16 The full statement can be accessed via this link

17 EXCLUSIVE: CBN asks First Bank to call in Otudeko's Honeywell Flour Mills loan facility within 48 hours last accessed, 17th May, 2021.

18 Paragraph 2.4.5 of the CBN Code of Corporate Governance for Banks and Discount Houses 2014 provides that the tenure of the CEO of a bank shall be in accordance with the terms of engagement with the bank but subject to a maximum period of ten (10) years. Such tenure may be broken down into periods not exceeding five (5) years at a time.


20 Section 47(6) and (7) of BOFIA.

21 First Bank is one of the Systematically Important Banks in Nigeria; the banks that are too big to fail.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.