First Bank of Nigeria Limited (FBN) has taken a strong stance in its ongoing dispute with General Hydrocarbons Limited (GHL), emphasising the need for good governance and transparency in a commercial transaction that has become the subject of litigation. The bank issued a detailed public statement to clarify the matter and refute what it described as “sponsored but false narratives” in certain media reports.
FBN disclosed that the controversy centers around credit facilities extended to GHL for the development of Oil Mining Lease (OML) assets. These loans, the bank explained, were governed by robust agreements that clearly outlined the obligations of both parties, as well as security arrangements to safeguard the transaction. Despite FBN fulfilling its obligations under the agreements, the bank alleged that GHL violated key terms, including the diversion of proceeds from the financed project.
“At the root of the present dispute is First Bank’s demand for good governance and transparency in the transaction, which GHL rejected,” the bank stated. FBN had proposed appointing an independent operator, mutually acceptable to both parties, to manage the financed assets transparently. The goal was to enhance visibility, protect all stakeholders, and ensure value creation. However, GHL declined the proposal and instead demanded additional funding, which the bank says was unjustifiable given the circumstances.
GHL’s refusal to execute the terms required for additional funding prompted the company to initiate arbitration proceedings and approach the Federal High Court for preservative orders. According to FBN, while some of these orders were granted, others were denied. The bank also clarified that it had filed a substantive claim against GHL at the Federal High Court, separate from the arbitration matter, regarding subsequent credit facilities provided to GHL.
FBN highlighted that the disputes arising from the subsequent transactions were explicitly required to be resolved through a competent court in Nigeria, as stipulated in the financial documents. “Consequently, it is incorrect to assert that First Bank abused the process of the court,” the statement read.
The bank further accused GHL of off-taking crude from the Floating Production Storage and Offloading (FPSO) vessel and diverting the proceeds, actions it deemed breaches of contract. In response, FBN sought legal remedies to preserve assets, recover diverted funds, prevent reoccurrences, and safeguard its interests.
As a responsible corporate entity with over 130 years of unbroken service, FBN reiterated its commitment to upholding the principles of good governance and transparency in all its dealings. “First Bank remains committed to ensuring that it continues to support the legitimate business aspirations of its teeming customers,” the statement read, adding that the bank is equally dedicated to building a strong credit culture where borrowers repay their debts as agreed.
The bank expressed disappointment at the lack of cooperation from GHL, emphasizing that its actions were solely motivated by the need to protect the interests of stakeholders and ensure the success of the financed project.
FBN also used the opportunity to reaffirm its financial strength and credibility, pointing to the oversubscription of the Rights Issue by its parent company, First Holdco Plc, as a testament to its resilience. The bank thanked shareholders for their support and expressed optimism about the success of the ongoing recapitalisation exercise.
The statement concluded with a reassurance to stakeholders, customers, and the general public of the bank’s unwavering commitment to delivering exceptional services and supporting economic growth.
This development sheds light on the complexities of commercial transactions in Nigeria’s oil and gas sector, where issues of governance, accountability, and adherence to contractual agreements remain critical to achieving mutual benefits.
With FBN’s insistence on transparency and GHL’s alleged breaches, the outcome of the ongoing legal proceedings will be pivotal in determining the future of this high-stakes financial relationship. Meanwhile, FBN’s firm stance highlights its resolve to uphold corporate governance standards, which could serve as a benchmark for similar transactions in the industry.
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