LAGOS, Nigeria (VOICE OF NAIJA)-Guaranty Trust Bank has taken legal action against 60 senior executives from 13 commercial banks amidst an ongoing lawsuit between GTBank and Afex Commodity Exchange regarding a N17bn Anchor Borrowers Programme loan dispute.
The 60 executives, comprising chairmen, chief executive officers, directors, and company secretaries of the 13 banks, are facing contempt charges for allegedly failing to enforce a No-Debit-Order placed on the accounts of Afex Commodity Exchange held with the banks.
In suit no FHC/L/CS/911/2024 involving Guaranty Trust Bank Limited and AFEX Commodities Exchange Limited, the Federal High Court, Lagos division presided by Justice CJ Aneke signed an order for the 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 Court Order’ was published in several national dailies read, “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-60st parties cited for contempt
The matter was adjourned to next Thursday.
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Parties cited for contempt include Access Bank, Citibank, Jaiz Bank, Union Bank, Fidelity Bank, First Bank of Nigeria Plc, First City Monument Bank, NDIC (liquidator for Heritage Bank), Polaris Bank, Stanbic IBTC Bank, Standard Chartered Bank, Taj Bank, United Bank for Africa and Zenith Bank alongside its principal officers.
In the court ruling dated May 27, 2024, twenty banks were directed to transfer monies standing to the credit of the respondent into the AFEX’s account with GTB until the N17.81bn is repaid.
The N17.81bn loans comprise N15.77bn; the amount outstanding and unpaid, as of April 17, 2024, and the cost of recovery and incidental expenses in the sum of N2.04bn.
The court granted an injunction permitting GTB to assume control of AFEX’s 16 warehouses spread across seven states.
It authorized GTB to sell the commodities stored in these warehouses, which were acquired using the Central Bank of Nigeria’s Anchor Borrowers’ loan facility.
Previously in the month, the court had initiated contempt proceedings against AFEX and several of its key officers, namely Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, and Koonal Ghandi.
According to court documents, AFEX obtained a loan from GTB under the Anchor Borrowers Programme to finance smallholder farmers registered with the CBN’s programme.
The loan was intended to be repaid from the proceeds of commodity sales, despite being granted an extension, AFEX did not fulfill its obligations under the agreement.
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In a statement issued after the interim court order, AFEX asserted that it had already repaid approximately 90% of the loan facility.
“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,” the exchange said a 6-month extension period,” AFEX added.
The commodities exchange further noted that the enduring effects of the cash crunch continue to affect farmers.
These farmers have resorted to selling below market value to generate immediate cash flow to support their families, resulting in an inability to repay their debts.
Additionally, AFEX has urged the Central Bank of Nigeria to activate the collateral guarantee clause, which guarantees up to 70 percent under the Anchor borrowers programme.
“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,” AFEX concluded.
When the programme began in 2015, the CBN stated its primary goal was to establish economic connections between smallholder farmers and processors to enhance agricultural production and stabilize food prices.
Under the guidelines of the Anchor Borrowers’ Programme, farmers who benefit are required to repay their loans with produce at harvest time (this produce must cover both the principal loan amount and the interest) the payment is then made in cash equivalent to the farmer’s account by an anchor.
As of 2022, the Anchor Borrowers Programme had benefited at least 4.8 million people in a 2023 statement, the CBN reported releasing N1.079 trillion under the programme, with over N500 billion awaiting repayment.
The CBN has discontinued the programme as it shifts focus from development financing interventions to prioritizing price and monetary stability.