Entrepreneurs occupy a central position in any market economy. They serve as the spark plug in the economy’s engine, activating and stimulating all economic activities. A society is prosperous to the degree to which it rewards and encourages entrepreneurial activities because it is the entrepreneurs that determine the level of success, prosperity, growth and opportunities in any economy. This is reason countries go to great lengths to promote entrepreneurs.
Entrepreneurs also need the banks for expansion, hence their relationship is mutual for continued creation of employment, provision of goods and services and deepening of the economy. A commercial bank grants loans and extend credits to reliable customers based on agreed terms, and it’s from such loans that banks also make income. Thus, banks specialise in assessing the credit worthiness of borrowers and providing an ongoing monitoring function to ensure borrowers meet their obligations. It is somewhat difficult to measure the impact of banks financing in providing support for entrepreneurs in Nigeria.
However, there have been some success stories and leading lights that signpost Nigeria’s entrepreneurial spirit. Aliko Dangote owns the Dangote Group, a conglomerate with interests that cover food processing, cement manufacturing, and freight. The company operates in Nigeria and other African countries, including Benin, Cameroon, Ghana, South Africa, Togo, Tanzania, and Zambia. The Dangote Group employs over 11,000 people.
Oba Otudeko, an astute and highly successful investor and entrepreneur also owns Honeywell Group, which has invested in diverse sectors of the economy since its inception in 1972. It has grown to become one of Nigeria’s leading indigenous conglomerates. The Honeywell Group is now a major diversified group in key sectors of the economy including foods and agro-allied business, oil and gas, power, infrastructure, services and real estate.
Through other portfolio investments, the Group has become a significant provider of capital to other sectors of Nigeria’s economy. Honeywell Group employs over 10,000 people. In the services sectors, Jim Ovia and Tony Elumelu stand out. Ovia is the promoter and founder of Visafone and was a co-founder of Zenith Bank Plc while Tony Elumelu is the Chairman of Heirs Holdings, the United Bank for Africa, among others.
These entrepreneurs have at certain times enjoyed and continue to enjoy the support of the Nigerian banking and financial system through loans and credits.
As businesses managed by human beings, with numerous risks inherent in commercial and contractual transactions, disputes are often inevitable. It is in view of this that the Bankers’ Committee created a sub-committee on “Ethics and Professionalism” to address customer complaints and disputes arising from banking practices.
The Bankers’ Committee is an umbrella body comprising the Central Bank of Nigeria and commercial banks. The sub-committee has resolved over 1000 cases/petitions since its establishment in December, 2000. Therefore, the case between Ecobank and Honeywell shouldn’t be irresolvable.
Ecobank and Honeywell had transaction conflict, which resulted in litigation. Court proceedings as instituted by both parties revealed that Honeywell Group through three of its companies (Anchorage Leisure’s Limited, Siloam Global Services and Honeywell Flour Mills) obtained various banking facilities from Oceanic Bank. These facilities were subsequently inherited by Ecobank Nigeria Limited upon its acquisition of Oceanic Bank.
Due to various factors within established norms of banker/customer relationships, Honeywell Group, in 2012, commenced discussions with Ecobank for a full and final settlement of its obligations to the bank. At a meeting in July 2013 between the two organisations, which was led by the Group Executive Director, Honeywell Group, Oba Otudeko on one hand and the Managing Director/CEO of Ecobank, Jubril Aku on the other hand, an agreement was reached for the payment of N3.5 billion in full and final settlement of Honeywell’s indebtedness to Ecobank.
An initial and immediate good faith payment of N500 million was made and a balance of N3 billion paid subsequently, making a total of N3.5billion paid in accordance with the agreements reached.
Ecobank duly acknowledged the cumulative payment of N3.5 billion in a letter dated February 2014 and agreed to update its records with the credit registry. Surprisingly, nine months after payment was effected, Ecobank informed Honeywell that it did not obtain board approval for the agreement. This feedback was obviously not acceptable to Honeywell as the agreement was reached with the Managing Director of the bank, who ordinarily should be able to bind the bank on agreements of such nature and further documented in numerous correspondence. This thus became a basis of dispute between Honeywell Group and Ecobank as it was clear to Honeywell that it had fulfilled its obligations to Ecobank based on agreements reached.
The dispute was submitted to the Bankers’ Committee, Sub-Committee on Ethics and Professionalism and a ruling was issued by the committee in July, 2015 to the effect that “the agreement between Honeywell Group and Ecobank to pay N3.5 billion as full and final payment of the borrowers’ indebtedness is valid and should be complied with.”
Ecobank till date has not adhered to this ruling. Both parties have filed suits at the Federal High Court with respect to the matter.
The Head, Legal and Regulatory Affairs of Honeywell Group, Mrs. Yemisi Busari said: “We have been surprised by the actions of Ecobank, which have been very inconsistent and short of the standards expected of a bank of its standing. In our opinion, there was a valid agreement to pay a sum in full and final settlement of our obligations and we have met our part. Independent third parties have also attested to this fact. Are Managing Directors of banks no longer recognised agents, able to bind their organisations to agreements? Why did it take the bank nine months to realise they didn’t have board approval for their Managing Director’s actions? Does Ecobank, which subjected itself to the hearing by the Bankers’ Committee, Sub-Committee on Ethics and Professionalism, not believe it is accountable to the Bankers’ Committee, because the ruling was not in their favour? What is the objective of the bank in making multiple filings before different judges in the same Federal High Court?
“As stated earlier, this dispute will no doubt raise serious concerns in the minds of most entrepreneurs in Nigeria as funding from banks is critical to the running of most businesses. Will the banks respect the sanctity of agreements reached with their customers? What recourse is available to entrepreneurs when banking standards and decisions are not adhered to? How is compliance to standards and codes enforced in the banking industry?
Without a resolution of the issues highlighted above, entrepreneurship will gradually become stifled and the impact on the budding Nigerian economy may be colossal.”
- Lawal is public affairs analyst in Lagos
