N17bn Debt: GTBank Drags 60 Bank Execs to Court

60 top executives from 13 banks are being sued by GTBank for N17 billion in debt.

GTBank sues 60 top executives from 13 banks over N17bn debt, citing contempt for failing to uphold a No-Debit Order. The legal battle involves AFEX Commodity Exchange and Heritage Bank, with GTB seeking to recover the loan and AFEX attributing its inability to repay to economic difficulties.

As part of a continuing legal dispute between GTBank and AFEX Commodity Exchange over a N17 billion loan for the Anchor Borrowers Program, Guaranty Trust Bank, or GTBank, has filed lawsuits against more than sixty senior officials from thirteen commercial banks.

The executives, comprising the CEOs, chairmen, directors, and company secretaries of the thirteen banks, are being held in contempt for their purported inability to uphold a No-Debit Order imposed on the accounts of Afex Commodity Exchange with these banks.

Justice CJ Aneke of the Federal High Court in Lagos, who was presiding over a lawsuit between Guaranty Trust Bank Limited and AFEX Commodities Exchange Limited under suit number FHC/L/CS/911/2024, ordered the imprisonment of Heritage's chairmen, MDs, directors, company secretaries, and liquidator.

The Federal High Court in Lagos, presided over by Justice CJ Aneke, issued an order to imprison the chairmen, MDs, directors, company secretaries, and the liquidator of Heritage Bank (Nigeria Deposit Insurance Corporation) for not following its May 27, 2024 ruling in suit no. FHC/L/CS/911/2024 involving Guaranty Trust Bank Limited and AFEX Commodities Exchange Limited.

“An order granting leave to the Plaintiff Applicant to serve Form 48 (Notice of Consequences of Disobedience to Order of Court) dated 11th June, 2024, and all other forms and processes that may be issued in this contempt proceeding, including Form 49 on the 1st-60th parties cited for contempt,” read a legal notice titled “Order to serve notice of disobedience to order of court via newspaper publication.”

Access Bank, Citibank, Jaiz Bank, Union Bank, Fidelity Bank, First Bank of Nigeria Plc, First City Monument Bank, NDIC (acting as Heritage Bank's liquidator), Polaris Bank, Stanbic IBTC Bank, Standard Chartered Bank, Taj Bank, United Bank for Africa, and Zenith Bank, as well as their executive officers, are among the parties cited for contempt.

According to a May 27, 2024 court judgment, these banks must deposit money that was credited to the respondent into AFEX's GTB account until the N17.81 billion is paid back.

The outstanding balance of N15.77 billion as of April 17, 2024, plus N2.04 billion in collection and incidental costs make up the N17.81 billion loan.

Additionally, the court issued an injunction enabling GTB to seize control of AFEX's sixteen warehouses, spread across seven states, and liquidate the goods kept there that were acquired through the Anchor Borrowers' lending facility from the Central Bank of Nigeria.

The court had filed a contempt order against AFEX and many of its top executives, including Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, Koonal Ghandi, and Ayodele Balogun, earlier in June.

Court records state that AFEX acquired the GTB Anchor Borrowers Program Loan facility in order to finance smallholder farmers who were registered under the CBN's Anchor Borrowers' initiative.

Commodity sales were to be used as repayment for the loan, but even after an extension, AFEX was unable to fulfill its end of the bargain.

In a statement released after the temporary court order, AFEX claimed to have paid back almost 90% 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.

Additionally, AFEX said that starting in 2020, farmers received input for three seasons in a row at full loan value.

The exchange stated that up until economic difficulties impacted the farmers' activities to whom the monies were allocated, it had continuously paid back the loans.

“Over 800,000 hectares of farmland were financed through the course of the programme's operationalisation; 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 cent repayment from farmers on their input loan bundles, down from our 90per cent repayment rates in the previous eight years of providing input financing for farmers. The low repayment rate ultimately impacted on 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 further disclosed that the long-term consequences of the financial crisis have continued, impacting farmers who, in order to obtain quick cash infusions to support their family during that time, sold their goods below market value, leaving them unable to repay.

AFEX has meantime pushed the Nigerian Central Bank to activate the Anchor Borrowers program's up to 70% collateral guarantee clause.

“In light of these engagements, we consider the recent steps by Guaranty Trust Bank Limited to be premature, coming in the midst of open conversations that are being had with all parties to find a path to resolution that does not unduly punish farmers, who have been the biggest hit by macroeconomic conditions that they had no control over,” AFEX concluded.