Reported by: Oahimire Omone Precious | Edited by: Oravbiere Osayomore Promise.
The Central Bank of Nigeria has initiated a review of a landmark Federal High Court judgment delivered in Lagos, which nullified its 2024 intervention in Union Bank of Nigeria, while reassuring depositors that the financial institution remains stable and fully operational.
The ruling, delivered by Justice Chukwujekwu Aneke, declared that the apex bank acted beyond its statutory powers when it dissolved the board and management of Union Bank in January 2024. The court held that the action was not in compliance with the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020, effectively rendering the regulatory intervention unlawful and unconstitutional.
In its judgment, the court quashed all decisions taken by the Central Bank-appointed board and ordered the immediate reinstatement of the former leadership of the bank, led by Chairman Farouk Mohammed Gumel. It further restrained the regulator and its appointees from taking any further steps relating to the governance or recapitalisation of the bank.
The dispute originated from the Central Bank’s decision in January 2024 to dissolve the boards and management of Union Bank and appoint a new leadership team, including Yetunde Oni as managing director and chief executive officer. At the time, the intervention was part of broader regulatory measures affecting multiple banks, reportedly aimed at addressing corporate governance concerns and financial stability issues within the sector.
The move was challenged in court by the bank’s core shareholders, including Titan Trust Bank, Luxis International, and Magna International. The plaintiffs argued that the Central Bank’s actions were carried out without due process and violated their rights as investors. They further alleged that the recapitalisation process initiated under the interim board diluted their shareholding and excluded them from key corporate decisions.
In its judgment, the court sided with the shareholders, stating that the regulator failed to provide fair hearing before taking such far-reaching action. It also ruled that the Central Bank’s reliance on its regulatory powers did not shield it from judicial review, particularly where those powers were exercised outside the limits of the law.
The implications of the ruling are significant, not only for Union Bank but for the broader Nigerian banking sector. By nullifying the intervention and halting the recapitalisation process initiated by the interim board, the judgment introduces uncertainty regarding the bank’s immediate governance structure and its compliance with ongoing regulatory requirements, including capital adequacy thresholds.
In response, the Central Bank stated that it is carefully studying the judgment and will determine its next steps after obtaining the Certified True Copy of the ruling. While refraining from immediate legal escalation, the regulator reaffirmed its commitment to the rule of law and due process, signaling the possibility of an appeal or further legal action.
At the same time, the apex bank moved to calm concerns among depositors and the wider public, emphasizing that Union Bank remains financially sound. It stressed that the court’s decision does not affect the bank’s day-to-day operations or its ability to meet customer obligations, including withdrawals and other financial transactions.
Union Bank, one of Nigeria’s oldest financial institutions with a history spanning over a century, continues to operate a nationwide network serving individuals and businesses. Despite the legal developments, there has been no indication of disruption to its services, and both the regulator and market observers have sought to maintain confidence in the system.
The ruling has also triggered broader debates within legal and financial circles about the scope of regulatory authority in Nigeria. Analysts note that while the Central Bank is empowered to intervene in financial institutions to safeguard systemic stability, such powers must be exercised within clearly defined legal boundaries.
The case also highlights the tension between regulatory oversight and shareholder rights. While regulators may act to prevent potential risks to the financial system, investors expect transparency, due process, and protection of their interests. The court’s emphasis on fair hearing and statutory compliance underscores the importance of balancing these competing considerations.
Industry experts warn that the immediate effect of the judgment could create operational ambiguity, particularly regarding which board has the authority to make decisions for the bank. Questions have already emerged about whether the reinstated board can seamlessly resume control and how prior decisions made by the interim management will be treated.
There are also concerns about the impact on ongoing recapitalisation efforts across Nigeria’s banking sector. With regulators pushing banks to meet new capital requirements, any disruption in governance could affect timelines and compliance strategies, especially for institutions directly involved in legal disputes.
Despite these uncertainties, the Central Bank’s reassurance appears aimed at preventing panic within the financial system. Maintaining depositor confidence remains critical, as perceptions of instability can have far-reaching consequences beyond a single institution.
For now, the situation remains fluid. The reinstatement of the former board, the halt of the recapitalisation process, and the Central Bank’s pending review collectively set the stage for a potentially protracted legal and regulatory contest.
As stakeholders await further developments, the case is poised to become a defining moment in Nigeria’s financial regulatory landscape, shaping how oversight powers are interpreted and exercised in the years ahead.
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