• Thursday, May 23, 2024
businessday logo


Fact-Checking: Polaris Bank loses N26bn loans granted to 6 ex-directors

Sale of Polaris Bank supervised by divestment committee – CBN explains

A report being syndicated by a section of online media with the title: Polaris Bank loses N26bn loans granted to 6 ex-directors without collaterals, made several claims in figures, interpretations and practices.

Claim 1. POLARIS Bank has lost N26.005 billion worth of loans granted to 6 ex-directors, mostly without collateralsThis claim is untrue, founded primarily on lack of understanding of accounting principles and convenient disregard of the denotative dates and notes to the accounts.

The story was based on the audited accounts and report for the year ended December 31, 2022. The report was approved on March 20, 2023. In line with the general comparative and accrual reportage format, the bank presented the status report for the preceding year ended December 31, 2021 and the reporting year ended December 31, 2022.

The two comparative tables were clearly marked and were also evidently seen by the writer of the story. While the 2021 insider credit status report listed eight directors with total outstanding loans of N25.827 billion, the reporting year 2022 status report updated that four directors had fully liquidated their loans, a director had partially liquidated her loan while two directors had seen increase in outstandings against their names. The 2022 status report indicated a total of N31.646 billion insider credits related to the four remaining former directors. The 2022 report clearly indicated that Abimbola Izu, Dotun Adeniyi, Tokunbo Abiru and Theodora Onwughalu had paid their loans and as such, were not listed in 2022.

The 2022 report was clearly indicative of the changes and the compliance of the bank with the Prudential Guidelines and Banks and Other Financial Institutions Act (BOFIA). A former director, with related interest in Newcross Exploration and Production, Jason Fadeyi, whose loan of N25.442 billion in 2021 accounted for 98.5 per cent of the total outstanding insider credits in 2021, saw his total outstanding loan rising to N30.922 billion in 2022, ostensibly due to accrued interests and increase due to foreign exchange (forex) conversion rate as the loan is a foreign currency (US Dollar)-denominated loan. It’s a simple understanding that forex rate is a mediating factor in foreign currency denominated loan. The closing forex rates were generally available on the Central Bank of Nigeria (CBN)’s website. The Naira/US Dollar rate was N424.11 per US$ for the year ended December 31, 2021 and N461.1 per US$ for 2022. It was N400.33 per US$ in 2020. All these partially accounted for the year-on-year change in the loan. Meanwhile, Newcross Exploration/Fadeyi’s N30.922 billion accounted for 97.7 per cent of total outstanding insider credits in 2022.

Interestingly, as rightly reported by the story, this loan, N30.922 billion, has a perfected collateral, a debenture of the assets of the company. A further check indicated that Newcross Exploration/Fadeyi’s loan is a syndicated facility by eight banks with the FBN Trustees as the trustee managing the collateral on behalf of all the lenders. Jason Fadeyi was cited for the loan under the general principles of insiders which regard family members, relatives and associates as insiders. As rightly pointed out by the story, Corporate Affairs Commission (CAC)’s records showed that Newcross Exploration and Production was registered on July 9, 2013, with Festus Fadeyi and Bolaji Ogundare as persons with significant control of the company.

The second major insider credit in 2022 report was a N535 million loan credited to Mr. Tunde Ayeni, about 1.7 per cent of the total loans. This was classified as “performing”.
Altogether, the collaterised, syndicated loan of Newcross Exploration/Fadeyi and “performing” loan of Ayeni accounted for about 99.4 per cent of total outstanding insider credits in 2022. All these were clearly stated and evident in the table which the reporter accessed, but failed due to poor interpretations and understanding of reportage format.

Claim 2: As of December 31, 2022, total outstanding loans owed by these ex-directors of Polaris Bank, some of which would not be repaid, amounted to N57.473 billion.This claim is untrue, and flowing from the first claim, it exposed the poor understanding of the comparative reporting (going-concern) basis. To arrive at its claim of N57.473 billion, the reporter simply added the total outstanding insider credits in 2021 of N25.442 billion to total outstanding insider credits in 2022 of N31.646 billion. The reporter conveniently ignored the differential in year ending and the fact that the two tables, like other segments of the annual reports and accounts, were provided for comparative reporting. The reporter ignored the indicative narration showing that the Newcross Exploration/Fadeyi’s loan was same loan, moving from a reporting year to another reporting year. By implication, the story increased Newcross Exploration/Fadeyi’s loan to N56.364 billion, 98.1 per cent of its claimed total outstanding loans of N57.473 billion.

Further check of post-year end events, which are usually indicated in updates to accounts after year-end but prior to board’s final approval and signing off of the accounts, indicated that Demanta/Ibiye Ekong’s N89 million outstanding loan was fully paid off in February 2023. In essence, the only director-related insider loan outstanding is former Managing Director Timothy Oguntayo’s N100 million, which is a subject of reconciliation between the tripartite of employee, employer and regulator. As noted by the story, Oguntayo “who was earlier charged by the Economic and Financial Crimes Commission (EFCC) but later exonerated”, had no misconduct established against him. As noted earlier, the Newcross Exploration/Fadeyi’s loan is a syndicated facility by eight banks with the FBN Trustees as the trustee managing the collateral on behalf of all the lenders. CBN’s Prudential Guidelines states that “For syndicated facilities, the classification shall be the same across all banks involved in the syndication. Thus, the worst classification by any of the banks involved in the syndication shall apply across board”.

Claim 3: Abimbola Izu, another ex-director, got N103 million mortgage loan from Polaris Bank but did not repay it, according to bank records. Her collateral perfection status was also recorded as “not applicable.” Bank records also showed that Izu took a term loan of N17 million with another “not applicable” collateral status.This claim is untrue. The 2022 audited report, on which the story was based, showed that Izu was not indebted to the bank, having liquidated the prior year’s status report.Claim 4: Fadeyi borrowed another N30.922 billion term loan from the bank – which has been placed on the watchlist.

This claim is false. It emanated from the poor understanding of the comparative reporting (accrual, going concern), basis. This claim particularly undercut the credibility of the entire story, obviously showing the reporter had no training or understanding of financial reporting/journalism. This also subjects the story to motive analysis as the reporter failed to adhere to a pattern of errors, rather zigzagging across erroneous claims to arrive at unsubstantiated claims. For instance, while doubling up Fadeyi’s, the story kept Oguntayo’s N100 million loan unchanged over the comparative years, but curiously reported Ekong’s loan as N89 million (2022 year-end outstanding) and N4 million, N4 million (two loans in 2021). Whereas, the 2021 report showed that Ekong owed a total of N108 million (N100 million by Demanta, N4 million, N4million), and by 2022, these reduced to N89 million, having liquidated the two N4 million, N4 million personal loans and reducing the N100 million related loan to Demanta to N89 million. A pattern of error would have simply added Ekong’s related loans of N108 million in 2021 with N89 million in 2022 to arrive at a false premise like Fadeyi’s. The story, cherry-picking of figures, simply reported N89 million while adding the two personal loans of N4 million each for Ekong as latest reporting year status.

Claim 5: Based on Polaris Bank’s records, Ibiyi Ekong of Demanta Nigeria Limited is another ex-director who took loans from the bank without repaying them. Ekong, a former executive director of the bank who resigned in 2016, owes the bank N89 million. Ekong also owes the bank N4 million borrowed as a mortgage loan and another N4 million taken as an auto loan, which was not repaid.

This claim is untrue. As explained above, the reporter engaged in convenient cherry-picking of figures, due to poor financial journalism background and lack of fidelity, even in its erroneous claims. While its claims based on the reporting year ended December 31, 2022 were false, post-reporting events showed that Demanta, which was the only Ekong-related insider credit outstanding in 2022, had been paid by February 2023, prior to the signing and final approval of the account in March 2023. The story: Polaris Bank loses N26bn loans granted to 6 ex-directors without collaterals, was first reported by one EconomyPost in October 27, 2023 and was reposted by one International Centre for Investigative Reporting (ICIR) Nigeria on October 31, 2023. There were clearly other reporting periods that the writer could have sought updates on the post-year-end changes.

Claim 6: Theodora Amaka Onwughalu is another ex-director who borrowed N19 million mortgage loan from Polaris Bank but did not pay it back.This claim is false. The 2022 reporting year status indicated Onwughalu was not indebted to the bank. Her total indebtedness of N19 million in 2021 had been paid by 2022.Claim 7: Similarly, Dotun Adeniyi, an ex-director of Polaris Bank, borrowed N27 million mortgage loan from the financial institution but did not repay it.

This claim is false. The 2022 reporting year status indicated Adeniyi was not indebted to the bank. His total indebtedness of N27 million in 2021 had been paid by 2022.Claim 8: Tokunbo Abiru, now a Lagos senator, was appointed the managing director of the then Skye Bank in 2016 but resigned in 2020 to fulfil his political ambition.In its cherry-picking and convenient disregard for facts and figures, the story while narrating the Abiru’s relationship, ignored that the 2021 report indicated that Abiru, as an ex-director, had a related (taken by a company related under insiders’ principles) “performing” loan of N9 million in 2021 reporting year, which had been paid off by the 2022 reporting year.