GTBank Takes 60 Bank Chiefs To Court Over N17bn Debt

NGX Admits GTB Holdco, List Shares
NGX Admits GTB Holdco, List Shares

While a lawsuit between GTBank and Afex Commodity Exchange about a N17 billion loan under the Anchor Borrowers Program remains outstanding, Guaranty Trust Bank has brought no less than sixty senior officials of thirteen commercial banks before the court.

The 60 executives, which include the chairmen, CEOs, directors, and company secretaries of the 13 banks, are being held in contempt for allegedly neglecting to carry out a No-Debit-Order that was purportedly placed on the Afex Commodity Exchange’s bank accounts.

In suit no. FHC/L/CS/911/2024 involving Guaranty Trust Bank Limited and AFEX Commodities Exchange Limited, the Federal High Court, Lagos division, presided over by Justice CJ Aneke, signed an order for the bank chairmen, MDs, directors, company secretaries and the liquidator of Heritage Bank (Nigeria Deposit Insurance Corporation) to be committed to jail for failing to obey its May 27, 2024 ruling.

A legal notice titled ‘Order to serve notice of disobedience to order of court via newspaper publication’ published in some national dailies, including The Punch, on Thursday, partly read, “An order granting leave to the Plaintiff Applicant to serve Form 48 (Notice of Consequences of Disobedience to Order of Court) dated June 11, 2024 and all other forms and processes that may be issued in this contempt proceedings, inclusive of Form 49, on the 1st–60st parties cited for contempt

The matter was adjourned to next Thursday. Parties cited for contempt include Access Bank, Citibank, Jaiz Bank, Union Bank, Fidelity Bank, First Bank of Nigeria Plc, First City Monument Bank, NDIC (liquidator for Heritage Bank), Polaris Bank, Stanbic IBTC Bank, Standard Chartered Bank, Taj Bank, United Bank for Africa, and Zenith Bank, along with their principal officers.

In the court ruling dated May 27, 2024, twenty banks were directed to transfer monies standing to the credit of the respondent into AFEX’s account with GTB until the N17.81bn is repaid. The N17.81bn loans comprise N15.77bn, the amount outstanding and unpaid as of April 17, 2024, and the cost of recovery and incidental expenses in the sum of N2.04bn.

The court also granted an injunction allowing GTB to take over AFEX 16 warehouses located across seven states and sell the commodities stored in them, which it said were procured with the Central Bank of Nigeria Anchor Borrowers’ loan facility.

Earlier in the month, the court had served contempt proceedings against AFEX and some of its principal officers, including Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, and Koonal Ghandi.

According to court papers, AFEX had sourced the Anchor Borrowers Program Loan facility from GTB to provide finance for smallholder farmers registered under the CBN Anchor Borrower’s programme. The loan was expected to be repaid from the sale of commodities. However, AFEX failed to uphold its end of the deal even after an extension.

In a statement following the interim court order, AFEX claimed that it had repaid about 90 percent of the loan facility. “However, a portion of the loan remains outstanding with the farmers, and while we have paid out a portion out of our own purse, we remain in discussions with CBN over the outstanding amounts of the said facility,” the exchange said.

It also said the full value of the loan was used to provide input to farmers in three consecutive seasons, starting in 2020. The exchange added that it had remained consistent with repaying the loans until economic headwinds impacted the operations of the farmers that they had disbursed the money to.

“Over 800,000 hectares of farmland were financed through the course of the programme’s operationalization; however, significant macro and policy headwinds, including the cash crunch on the back of the Naira redesign policy, severely impacted the productive capacity and market participation of the smallholder farmers in the 2022–2023 season.

“This resulted in less than 40 percent repayment from farmers on their input loan bundles, down from our 90 percent repayment rates in the previous eight years of providing input financing for farmers. The low repayment rate ultimately impacted our ability to refund the full value of the loan at the end of Q1 2023 and following a 6-month extension period,” AFEX added.

The commodities exchange also stated that the lingering effects of the cash crunch have continued to impact farmers, who sold at below market value to get immediate cash inflows to sustain their families during the period and remain unable to pay back.

Meanwhile, AFEX has called on the Central Bank of Nigeria to activate the collateral guarantee of up to 70 percent clause included in the Anchor Borrowers programme.

“Evidenced in the attached letters, our engagements with Guaranty Trust Bank Limited, a participating financial institution in the program, as well as the apex bank have seen us highlight these limitations on the part of the defaulting farmers, with suggestions being made to the CBN to activate the risk-sharing structure put in place for the program and release funds accordingly to sustain activities and allow for needed recovery efforts in our agriculture sector.

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