A Federal High Court sitting in Lagos has ruled that the Central Bank of Nigeria (CBN) acted outside its legal authority when it dissolved the board and management of Union Bank of Nigeria Plc in January 2024, declaring the regulatory intervention unlawful.
In a judgment delivered on Wednesday, the court held that the apex bank’s actions were not in compliance with the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020 and therefore lacked legal foundation. The ruling followed a suit filed by Titan Trust Bank Limited and affiliated entities, which claimed beneficial ownership of the bank and challenged the intervention.
Brandspur Banking News Desk reports that the court nullified all actions taken under the CBN-appointed interim management, including the recapitalisation process and any corporate decisions made during the period of regulatory control. The court also ordered the immediate restoration of the former board and executive team previously in charge of the bank’s operations.
The judge further restrained the CBN and other parties from taking additional steps affecting the governance structure, share capital, or ownership of Union Bank, effectively halting ongoing restructuring and investor selection programmes initiated after the takeover.
According to court findings, the applicants’ rights to fair hearing were breached, as they were sanctioned without being given an opportunity to respond to allegations arising from a special regulatory examination of the bank. The court also noted that their shareholding was significantly diluted during the recapitalisation exercise without due legal process.
The apex bank had defended its intervention by citing prudential concerns, including a negative capital adequacy ratio, a substantial capital shortfall exceeding ₦200 billion, and elevated non-performing loans, which it argued posed a threat to the bank’s stability and justified emergency action under BOFIA.
However, the court held that while the CBN possesses statutory powers to intervene in distressed financial institutions, such authority must be exercised strictly within the limits set by law and remains subject to judicial review where exceeded.
The ruling also clarified that Section 51 of BOFIA does not provide blanket immunity to the regulator when it acts beyond its statutory powers, reinforcing the principle that regulatory decisions affecting corporate governance and shareholder rights can be challenged in court.
The dispute traces back to January 2024, when the CBN simultaneously dissolved the leadership of Union Bank, Keystone Bank, and Polaris Bank, citing corporate governance lapses and financial instability. Interim boards were appointed and restructuring programmes were launched as part of the regulator’s corrective measures.
Legal analysts say the judgment could have significant implications for future regulatory interventions in Nigeria’s banking sector, potentially requiring the CBN to adopt more transparent processes and stricter adherence to statutory procedures when exercising its supervisory authority over financial institutions.
