Hold on to your hats, folks! The Nigerian stock market is experiencing some serious turbulence. FBN Holdings, one of the country’s oldest financial institutions, has seen its shares take a dramatic plunge after a public spat with General Hydrocarbons Limited (GHL). This isn’t just a minor blip; it’s a full-on rollercoaster ride that has investors scrambling for cover. Let’s dive into what’s causing this financial drama.
- FBN Holdings Shares Fall: Stock price dropped by 5.6%, hitting N28.50 per share.
- Dispute with GHL: A $225 million loan dispute is at the heart of the turmoil.
- Conflicting Claims: GHL denies owing the full amount, citing previous agreements.
- Market Reaction: Investors are reacting cautiously, fearing further declines.
What’s Causing the Panic?
The market is in a frenzy because of a nasty fight between FBN Holdings and General Hydrocarbons Limited (GHL) over a whopping $225 million loan. This isn’t just some friendly disagreement; it’s a full-blown public brawl that’s got everyone on edge. Shares of FBN Holdings took a 5.6% nosedive, closing at N28.50 each after starting the day at N30.20. That’s a significant drop, and investors are clearly not happy. Traders are saying that this drop is caused by a negative reaction to the ongoing dispute and think that this might be the start of a continuous decline in share value.
The Heart of the Matter: GHL’s Side of the Story
GHL isn’t taking these accusations lying down. They’re firing back, saying they don’t owe First Bank the amount they claim. GHL states that there is an agreement that was made between both parties. According to GHL, there was a subsisting moratorium (a temporary suspension of payments) pending the commercial production of oil. They even claim a Federal High Court judgment is in their favor. According to them, First Bank’s claim of indebtedness, especially in the media is “misleading and malicious”. They are even accusing First Bank of spreading untrue information. GHL insists that their agreements with First Bank were meant to support the bank.
Key Agreements and Claims
According to GHL, the oil company entered a binding agreement with First Bank on May 29, 2021. This agreement stated that First Bank would fund GHL’s oil exploration activities in exchange for a 50/50 split of the profits after taxes, this would go on for 8 years. GHL claims that First Bank sold a non-performing loan of about $718 million to the Assets Management Company of Nigeria (AMCON) for $600 million. According to GHL, that loan was unrelated to them and GHL was supposed to get money from it.
FBN’s Troubled Past
GHL claims that First Bank’s non-performing loan was due to the bank’s reckless lending to Atlantic Energy. GHL emphasizes that they had no part in that arrangement. Interestingly, GHL claims that their agreements with the oil company enabled First Bank to return to good standing. According to GHL, they helped First Bank declare a profit of N151Bn ($377.5million) in 2021 instead of declaring a huge loss.
The Market’s Reaction and What’s Next?
Investors are wary of buying FBN Holdings shares now. They are adopting a wait-and-see attitude pending the outcome of the dispute. The dispute could see FBN’s stocks plunge further or even be delisted from the Nigerian Exchange Limited (NGX). This dispute serves as a reminder of the importance of transparency and robust agreements. As this saga unfolds, we’ll be watching closely to see what happens next.
FBN Holdings: A History of Banking in Nigeria
First Bank of Nigeria, the backbone of FBN Holdings, is the oldest financial institution in Nigeria, with a history dating back to 1894. It’s gone through many changes, including being a part of the British Bank of West Africa. In 2011, a holding company called FBN Holdings was created, which now has many subsidiaries in the financial sector.
This story is still developing, so stay tuned for further updates.
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