GTBank drags 60 bank executives to court over N17bn debt

The N17 billion Anchor Borrowers Programme (ABP) loan controversy involving AFEX Commodity Exchange (AfCE) has taken a new turn, as Guaranty Trust Bank (GTB) has dragged about 60 senior executives from 13 commercial banks to court for contempt.

The executives of the 13 listed banks, including Chairmen, Chief Executive Officers (CEOs), directors, and company secretaries, are facing contempt proceedings for allegedly disregarding a No-Debit-Order reportedly placed on AFEX Commodity Exchange (AfCE)’s accounts with them.

Justice CJ Aneke of the Federal High Court, Lagos division had, in suit no FHC/L/CS/911/2024 involving GTB Limited and AFEX Commodities Exchange Limited, signed an order for the listed bank chairmen, MDs, directors, company secretaries and the liquidator of Heritage Bank (Nigeria Deposit Insurance Corporation) to be committed to jail for failing to obey its May 27, 2024 ruling.

A legal notice titled ‘Order to serve notice of disobedience to order of court vide newspaper publication’ published in some national dailies read this; “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 proceedings inclusive of Form 49 on the 1st-60th parties cited for contempt

With the matter was adjourned to next Thursday, parties cited for contempt are Access Bank, Citibank, Jaiz Bank, Fidelity Bank, First Bank of Nigeria Plc, First City Monument Bank, Union Bank, and NDIC (liquidator for Heritage Bank).

Others include Stanbic IBTC Bank, Polaris Bank, Standard Chartered Bank, TAJ Bank, United Bank for Africa and Zenith Bank alongside their principal officers.

The court ruling dated May 27, 2024, had ordered twenty banks to transfer monies standing to the credit of the respondent into the AFEX’s account with GTB until the N17.81billion is fully repaid.

The N17.81billion loans comprise N15.77 billion; the amount outstanding and unpaid, as of April 17, 2024, and the cost of recovery and incidental expenses in the sum of N2.04 billion.

The Court also granted an injunction allowing GTB to take over AFEX 16 warehouses located across seven states and sell the commodities stored in them, which it said were procured with the Central Bank of Nigeria (CBN) Anchor Borrowers’ loan facility.

Also, the Court had earlier in the month served contempt proceedings against AFEX and some of its principal officers including Ayodeji Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye and Koonal Ghandi.

Cited court papers indicate that AFEX had sourced the ABP Loan facility from GTB to provide finance for smallholder farmers registered under the CBN Anchor Borrower’s programme.

However, with the loan expected to be repaid from the sale of commodities, AFEX allegedly failed to uphold its end of the arrangement even after an extension.

Meanwhile, following the interim court order, AFEX, in an official statement explained that about 90 per cent of the said loan facility has been repaid.

According to the statement; “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”.

Additionally, the Exchange claimed that the full value of the loan was utilised to provide input to farmers in three consecutive seasons, beginning from year 2020.

The statement also the Exchange had remained consistent with repaying the loans until economic headwinds impacted the operations of farmers that benefitted from the disbursements

AFEX further explained thus; “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 six-month extension period”.

Also submitting that the lingering effects of the cash crunch have continued to impact farmers, who sold at below market value to get immediate cash inflows to sustain their families in the period and remain unable to pay back, AFEX called on the CBN to activate the collateral guarantee of up to 70 per cent clause included in the Anchor Borrowers programme.

In defence of its position, the Exchange stated thus; “Evidenced in the attached letters, our engagements with Guaranty Trust Bank Limited, a Participating Financial Institution in the program, as well as the apex bank have seen us highlight these limitations on the part of the defaulting farmers with suggestions being made to the CBN to activate the risk-sharing structure put in place for the program and release funds accordingly to sustain activities and allow for needed recovery efforts in our agriculture sector.

“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”.

Recalled when the ABP was flagged off in 2015, the CBN had explained that its broad objective was to create economic linkages between smallholder farmers and processors to increase agricultural output and ensure food price stability.

The ABP’s guidelines specifically stipulate that upon harvest, benefiting farmers are to repay their loans with produce (which must cover the loan principal and interest) to an anchor, who pays the cash equivalent to the farmer’s account.

In a statement issued in 2023, the CBN said over N1.079 trillion was disbursed under the programme, with over N500 billion due for repayment.

According to available statistics, the Anchor Borrowers Programme (ABP) had empowered approximately 4.8 million beneficiaries by 2022.

However, the Central Bank, under its current leadership, has shifted its focus towards its primary objectives of maintaining price and monetary stability, and has consequently discontinued the Anchor Borrowers Programme, diverging from the development financing initiatives that characterized the tenure of Godwin Emefiele’s leadership.