Over the last two weeks I have recalled the interesting corporate governance past of Togo based Ecobank Transnational International (ETI) for events that happened a decade ago in the year 2013. The banking group learnt valuable lessons and emerged to become the stronger and better governed institution that it is today.

But the history of the governance issues had begun earlier in a different country and in a different institution. In August 2009, the swashbuckling, tough talking Central Bank of Nigeria’s Governor Lamido Sanusi decided he had had enough of the egusi soup balance sheet nonsense that pervaded a number of Nigerian banking institutions. The banks had been borrowing heavily from the Central Bank due to liquidity issues as well as driving up the cost of corporate deposits as they were paying heavily to grab whatever deposits the market had. Saddled with non-performing loans that had been given to everyone including friends, lovers and domestic pets of the bank CEOs, Sanusi woke up and fired five CEOs of some of Nigeria’s largest local banks at the time while appointing new CEOs with the same stroke of the pen. One of the five banks was Oceanic Bank.

Like any good corporate that recognizes a crisis should never be wasted, ETI made a play for Oceanic Bank and spoke to one of South Africa’s big four banks, Nedbank to give it a $285 million loan to purchase the Nigerian jewel. Nedbank gave the loan, with an option to convert the same into equity at the end of the year 2014 loan tenor. ETI thus acquired Oceanic Bank in 2011 which it renamed Ecobank Nigeria.

The trickier situation following the huge governance blowout in Togo was for Nedbank. While ETI’s banking fundamentals remained strong, the governance issues raised were coming at a time that they had to make a decision on whether to exercise their option to convert their loan into equity. They decided to take the Nike route and just do it. By the end of 2015, the largest shareholders of ETI were South Africa’s Nedbank at 20.7%, Qatar National Bank at 18% and the South African institutional investor Public Investment Corporation at 13.8%. The other notable shareholder was the disgraced former group CEO’s employer, the International Finance Corporation (IFC),  whose equity funds combined to an ownership level of 14.4%. For all its West African origins, the bank had essentially become international in its shareholding structure.

At its incorporation in 1985, the largest shareholder of the institution was the Economic Community of West African States (ECOWAS) Fund for Cooperation, Compensation and Development, the development finance arm of ECOWAS. However, over time the anchor shareholder’s dilution had likely led to the institution being board driven rather than shareholder driven. Consequently it was not difficult for a chairperson to lean into the power that had inadvertently fallen into his lap, as nature abhors a vacuum. Getting a chief executive to do his bidding was always going to be a natural consequence.

Looking at those events from a bird’s eye view, it starts to become apparent that the reason the whistleblowing chief financial officer chose the Nigerian jurisdiction to do it was likely because there would be a sympathetic regulatory environment. Oceanic Bank’s fired CEO, the pearl bedecked Mrs. Cecilia Ibru, was charged in court with negligence, reckless grant of credit facilities and mismanagement of depositors’ funds. In October 2010, she pleaded guilty, was sentenced to six months in prison and ordered to hand over $1.2 billion in cash and assets. Given that the group chairman’s $10 million non-performing loan was likely part of Ms. Ibru’s diamond studded lending history, it is probable that the whistle blower took a punt that the firm hand of Nigerian justice would slap some sense in favour of good governance.

With the shareholders now taking a keener interest in the governance of the bank, a stronger board was put in place reflecting geographical representation amongst the individual directors who have credible professional and governance stripes. In September 2015, two years after the debacle,  the board hired an excellent group CEO, the highly respected and extremely smart former Citibank senior Ade Ayeyemi, who taught core banking to many of us Citibank trainee bankers. In owning the difficult past that the banking group had endured, the group chairman Alain Nkontchou paid a glowing farewell tribute to him in the 2022 financial report. “As the head of our institution since September 2015, Ade’s leadership has helped to stabilise an institution that had experienced difficulties in the past….Working with the board of directors, Ade has contributed to the strengthening of Ecobank’s corporate governance standards.” The board and management continue to live happily ever after.

 

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X: @carolmusyoka