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CBN issues ultimatum to First Bank of Nigeria on divesting its interest in Honeywell Flour Mills

In a letter dated 26th April 2021 and addressed to Ibukun Awosika, the Chairman of First Bank Nigeria Limited, in response to their audited International Financial Reporting Standards accounts for the financial year that ended 2020, the Central Bank of Nigeria raised its concerns that First Bank of Nigeria had not complied with regulatory directives on divesting its interest in Honeywell Flour Mills despite several reminders.

In the letter signed by the CBN’s Director of Banking Supervision, Haruna B. Mustafa, the Apex bank said:

We further noted that after 4 years the bank is yet to perfect its lien on the shares of Mr. Oba Otudeko in FBN Holdco which collateralized the restructured credit facilities for Honeywell Flour Mills contrary to the conditions precedent for the restructuring of the company’s credit facility.”

The CBN stated that for failure to perfect the pledge and satisfy the condition for regulatory approval, such restructuring has been terminated and the credit facilities now payable immediately.

Consequently, the CBN issued an ultimatum of 48 hours that was meant to elapse on the 28th of April for Honeywell Flour Mills to fully repay its obligations to First Bank Nigeria as the failure to do so could cause the apex bank to take regulatory measures against the insider borrower and the bank.

Meanwhile the CBN in its words also “noted the untenable delay in resolving the long outstanding divestment from Bharti Airtel Nigeria Ltd in line with extant regulations of the CBN.”

Furthermore, the Apex Bank instructed First Bank Nigeria to diversify the equity investments in all non-permissible entities such as Honeywell Flour Mills and Bharti Airtel Nigeria Limited within 90 days.

Prior to Thursday’s trading session, the Tier 1 bank was trading at N7.40 within a striking distance to its 52 weeks high of N9 with a market capitalization standing at N265.6 billion; and Honeywell Flour Mills was priced at N1.33 with a market value of N10.55 billion.

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