Nigerian billionaire Femi Otedola has accused Zenith Bank, the country’s biggest commercial bank, of engaging in fraudulent activities involving billions of naira.
Otedola, one of Nigeria’s wealthiest individuals alongside the likes of Aliko Dangote, deals in power, oil and gas, and owns several other businesses across shipping, real estate, and finance sectors.
Seaforce-Zenith Bank dispute
The businessman claims that Zenith Bank unlawfully used the account of his company, Seaforce Shipping Limited, for suspicious transactions without his knowledge or consent. The allegations come after a meticulous review of Seaforce’s bank statements, covering about 13 years.
During this review, Otedola discovered several unexplained debits and credits on Seaforce’s account with Zenith Bank, dating back to 2011. Consequently, the tycoon notified law enforcement of the irregularities.
Otedola’s petitions shows that Seaforce’s account was used for numerous transactions without the company’s approval. The businessman says he only became aware of these dealings recently, after noticing significant discrepancies in the bank balance of Seaforce’s accounts, following a tip-off by a whistle-blower.
Otedola stated that despite Seaforce never applying for nor taking a loan from Zenith Bank, the account was used for unauthorized trading activities totaling billions of Naira.
When Otedola requested documentation to support these loans, including offer letters, Zenith Bank reportedly failed to provide them.
A letter from Zenith Bank dated March 19, 2018, addressed to Seaforce’s auditors, Shofolawe-Bakare & Co, indicated a debt of N2,278,420. However, transactions amounting to over N16 billion were recorded against Seaforce’s account from 2011 to 2024. These transactions have now resulted in a debt of N5 billion, largely due to interest charges.
In response, to the alleged fraud, a senior official of Zenith Bank has already been questioned by the police, the Cable reports. Additionally, Otedola and his associated companies—Zenon, Seaforce, Luzon Oil and Gas, and Garment Care Limited—have obtained a federal high court injunction against Zenith Bank, Quantum Zenith Securities and Investment, Veritas Registrar, and Central Securities Clearing System.
This injunction restrains these entities from trading shares or paying dividends until a hearing on the motion for an interlocutory injunction is held.
Pertinent questions
The case has raised numerous questions about the internal operations at Zenith Bank.
- How could Seaforce’s account have been used for years without detection by the company or its chairman?
- What were the specific transactions that resulted in the debit and credit entries?
- Who approved the loans that Otedola claims were never applied for or received by his company?
- How did these loans bypass the internal approval processes, including management and board credit committees?
- How were these unauthorised transactions not flagged by the bank’s internal auditors?
- Given Otedola’s assertion that the account was last officially operated in 2010, why was there no ‘post no debit’ notification or dormancy flag placed on the account?
- How did Zenith Bank report the transactions and loans in its financial statements?
- What internal controls were in place at Zenith Bank to monitor and verify transactions on Seaforce’s account?
- How did Zenith Bank respond to any if at all internal reports or concerns raised by employees, customers, or other stakeholders regarding irregularities in Seaforce’s account?
The ease with which these unauthorised transactions allegedly occurred over an extended period calls into question the effectiveness of internal and external monitoring mechanisms in Nigeria’s banking sector.
As Otedola and Zenith Bank reportedly seek to resolve the matter amicably, these unanswered questions continue to fuel speculation and concern.
Implications for Zenith Bank
The potential implications for Zenith Bank are significant, as the allegations suggest not just individual failings but possible systemic issues within the bank’s operations and oversight mechanisms.
If the allegations against Zenith Bank are proven true, the implications could be severe and far-reaching:
- Zenith Bank could be ordered to pay substantial monetary damages to Otedola and his companies. The amount would depend on the evidence presented and the court’s decision. Notably, the damages could be significant and have a material impact on the bank’s financial position.
- A public court case could harm Zenith Bank’s reputation. Allegations of fraud and misconduct could erode customer trust and investor confidence, affecting the bank’s business operations.
- Regulatory authorities, such as the Central Bank of Nigeria (CBN), may investigate Zenith Bank’s practices. If wrongdoing is confirmed, the bank could face fines, penalties, or other regulatory actions. Regulatory scrutiny could also result in increased oversight and compliance requirements for the bank, leading to additional operational costs.
- Shareholders may react negatively to the scandal, leading to a decline in Zenith Bank’s stock price.
