A Nigerian high court has granted bail to seven senior bank officials in a financial scandal that threatens the recovery of sub-Saharan Africa’s second largest economy.
The former executives face charges ranging from recklessly granting loans to share price manipulation following a $2.6bn bailout.
The bank chiefs are part of a group of 16 directors arrested in August by the country’s anti-corruption agency, the Economic and Financial Crimes Commission (EFCC), for incurring billions of dollars in bad debts at five banks.
The court is to rule on bail applications for the rest of the group on Tuesday, with the trial due to start on November 23.
The case is seen as a litmus test of whether the central bank will have the backing it needs to push through a wider clean-up of Nigeria’s banking system.
Other groups have raised questions about the central bank’s actions, including debtors listed by the regulator as holding non-performing loans.
The central bank has said the institutions will be run as going concerns until new investors can be found to recapitalise them and has said the capital could be convertible to some form of Tier 2 debt or preference shares.
Mismanagement details
The country’s central bank sacked the heads of Afribank, Intercontinental Bank, Union Bank, Oceanic Bank and Finbank on August 14 for mismanagement and running the institutions into insolvency.
It said the total loan portfolio of the five stands at 2.8 trillion naira ($17.8bn).
But the central bank was forced to inject 400 billion naira ($2.6bn) into these banks, after sacking their chief executives, saying they were so weakly capitalised that they posed a systemic risk.
The bank chiefs include some of the biggest names in Nigeria’s financial services sector.
Erastus Akingbola, former chief executive of Intercontinental, is the only one of the five bank chiefs not to have yet been formally charged by the EFCC.
His lawyer, Felix Fagbohungbe, said he is currently in Britain. Akingbola has launched a legal case against his sacking, saying Lamido Sanusi, the central bank governor, did not follow due process in removing him.