First Bank shares drop 5.6% amid dispute with Hydrocarbons

• Published On: 14 January 2025 at 17:59

The stock price of First Bank of Nigeria Holdings Plc fell 5.63% on Monday on the Nigerian Exchange Limited, as investors remained cautious about trading shares of the country's oldest financial institution.

The stock, which began trading at N30.20 per share, fell by N1.70, or 5.63%, to close the day at N28.50 per share.

Market analysts attributed the drop to investors' negative reaction to the dispute between First Bank, a major subsidiary of FBH Holdings Plc, and General Hydrocarbons Limited over a $225 million loan.

Stock traders say investors are being cautious with FBN Holdings shares as they await the final outcome of the dispute, and they believe this could signal the beginning of a continued decline in the stock's value.

In response to allegations of a debt to FBN Plc, GHL management clarified, citing several agreements with FBN, that a moratorium remains in effect until commercial oil production begins.

GHL also claimed that a Federal High Court ruling was in its favour, calling FBN's claims of indebtedness, particularly in the media, "misleading and malicious."

In response to media reports from January 10-11 claiming that a Lagos Federal High Court had frozen GHL's accounts at all Nigerian financial institutions due to an alleged outstanding debt of $225,802,379.79 to First Bank, GHL's Director of Strategy and Operations, Abdelmuizz Bello, emphasised that these claims were false and misleading.

The reports also mentioned the involvement of Mr. Nduka Obaigbena, Chairman of THISDAY/ARISE Media Group.

According to Bello, the oil company signed a legally binding and enforceable Subrogation Agreement with First Bank on May 29, 2021.

The agreement required FBN to finance GHL's exploration, production, and development of OML 120. In exchange, the two parties agreed to split the profits from the OML's oil proceeds 50/50 over an eight-year period, after accounting for statutory payments and taxes.

Bello explained that FBN's 50% profit share would be used to repay its non-performing loans, which totalled around $718 million. This amount was later reduced to $600 million in order to address and resolve FBN's solvency concerns.

""In order to stay afloat, the FBN loan was sold for $600 million as an Eligible Banking Asset (EBA), with GHL's approval. The FBN then obtained cash from Assets Management Company of Nigeria (AMCON) and rebuilt the bank without meeting GHL's requirements.

"The FBN non-performing loan resulted from FBN's unsecured and reckless lending to Atlantic Energy under separate Strategic Alliance arrangements, to which GHL had no nexus or connection.

"The agreements made it clear that the Non-Performing Loan had nothing to do with GHL other than the fact that FBN will use 50% of the profits from OML 120 owed to it under the Subrogation Agreement to close the hole in its books caused by the Non-Performing Loan (NPL).

"For clarity, Atlantic Energy operated OMLs 26, 30, 34 and 42 - very different from GHL's OML 120," said the engineer.