The Honeywell and Ecobank saga is about more than two companies fighting

There is a low-burning, long-running spat in corporate Nigeria that is astonishing in both its breadth and all-encompassing for its potential implications on how business is conducted in Nigeria. It involves Honeywell Group, one of the country’s biggest conglomerates with a diverse portfolio that spans agriculture, food processing, consumer products and telecommunications and Ecobank, a pan-African financial giant with operations in 33 countries. While it has seen an uptick in media attention over the last few months due to some eye-raising developments, most of the reporting and commentary has been mired in the minutiae of who wrote what and who is claiming what. It is important, however, to set out its larger implications for the capital markets, the work of the judiciary in adjudicating on big-ticket disputes and the wider economy.

A slightly lengthy but quick recap of how we got here is necessary. Three companies, Anchorage Leisures Limited, Honeywell Flour Mills and Siloam Global Services Limited borrowed from Oceanic Bank, which was subsequently acquired by Ecobank. These loans were all performing (that is, being serviced) in accordance with the agreed terms. In May 2012, after Ecobank’s acquisition, Honeywell on behalf of the companies, commenced discussions to reach an agreement for full and final settlement of the indebtedness. In July of the following year, an agreement was reached that the companies will jointly pay the sum of ₦3.5 billion in full and final settlement. ₦500 million was immediately paid and a letter was written to the bank confirming the terms of the agreement. The bank responded in agreement.

By early 2014, the companies had completed the payment of the agreed sum. Honeywell thereafter wrote to Ecobank confirming the completion of the payments and requested a letter of discharge, the release of the securities held against the facilities and an update of the Group’s accounts on the Central Bank of Nigeria’s Credit Risk Management System (CRMS) portal. In February, Ecobank wrote to Honeywell confirming receipt of the sum and assured it would update the status of the concerned accounts on the CBN CRMS portal. As far as records show, this was and has not been done. In November 2014, following a long period of silence, Ecobank wrote seeking to introduce new conditions. That’s when the fireworks started.

In 2015, Honeywell petitioned the Bankers’ Committee, Sub-committee on Ethics & Professionalism for its intervention. The sub-committee ruled that the ₦3.5 billion agreement reached between Ecobank and Honeywell was a “full and final settlement” of Honeywell’s indebtedness to Ecobank and was valid. This was ratified by the Bankers’ Committee in June of that year. In flagrant disregard of the committee’s ruling, the bank continued to threaten the companies, even taking the extraordinary step to obtain an ex parte order effectively impacting the day-to-day operations of these entities (the order was ruled to have been wrongfully procured and the bank’s lawyers censured). The companies then asked the Federal High Court to decide whether or not they were still indebted to the bank. The final judgment in 2019 was in favour of the companies. Subsequently, Ecobank filed an appeal and won at the Court of Appeal in December 2020.  The Supreme Court was always going to weigh in on this matter and in its verdict, it mystifyingly held amongst other things that the negotiations between the companies and Ecobank were inconclusive and there was no final agreement for a payment plan therefore, the companies remain indebted to the bank. Crucially, the court was silent on the final amount of the supposed debt commitment. Attempts at resolving the impasse have stalled in part because Ecobank is now demanding an eye-watering and yet-to-be substantiated ₦13.5 billion.

Enter First Bank. Barbican Capital, registered in 2023 and controlled by Obafemi Otudeko and Foluke Oyeleye, acquired 4.8 billion shares or 13.3 per cent in First Bank’s parent company, FBN Holdings Plc. The duo are children of Mr Oba Otudeko, Chairman of Honeywell Group. However, Ecobank, through its solicitor ‘Kunle Ogunba & Associates wrote in early July 2023 to FBN Holdings asking them not to recognise the share acquisition on account of the outstanding debt. But neither Mr Otudeko personally nor the wider Honeywell Group were parties to the Supreme Court suit and so the judgement is not against either of them.

Ecobank’s unusually abrasive behaviour holds far more important implications than just trying to shake down a large conglomerate and its most important shareholder for a large pile of cash. Three are worth discussing in this piece. The first is the hit that this long-running saga has dealt on a wider perception of our capital markets. While not a major development in the overall scheme of things: inflation, corporate earnings reports, monetary policy, credit ratings, debt sustainability and wider macroeconomic health still weigh heavily on the mind of investors, this development will certainly not have helped. After more than two decades of policymakers and market participants crow about the growing maturity of our capital markets to support wider economic developments, investors will not be thrilled to learn that the posture of Nigerian funders on credit recovery is abrasive and adversarial.

The point about effective dispute resolution naturally courses into the second lesson: the role of the judiciary in facilitating the adjudication of big-ticket disputes. The courts are responsible for interpreting and applying the law to resolve disputes. In business, this involves interpreting contracts, statutes, and regulations to determine the rights and obligations of the parties involved. Courts are to provide clarity and consistency in legal interpretation, ensuring that businesses can rely on a predictable legal framework. It is hard to make the case that in this instance, the courts have achieved that outcome. From conflicting judgements to entertaining problematic ex-parte and other procedural applications, the judiciary has helped turn this dispute into a decade-long merry-go-round. At the core of this disagreement is not an inability to pay but ensuring what is paid is what is owed–a simple question that the courts have somehow negated to answer. It is not without reason that corporate players in this market are huge fans of alternative dispute resolution methods such as arbitration or mediation – they are often faster, more dynamic and less contentious. In order to mitigate some of the inherent challenges associated with litigation, some countries and jurisdictions, including India, Singapore, Qatar and certain U.S. states such as Delaware, have dedicated courts to handle commercial disputes. A few Nigerian companies, mostly high-flying startups have gone as far as setting up shop in these jurisdictions in part due to the presence of these dispute resolution mechanisms. Even the now-defunct World Bank’s Doing Business reports recognise specialised commercial courts as an asset contributing to a good business climate. The practice is not foreign to Nigeria either – we have a dedicated court for labour and industrial disputes, the National Industrial Court.

Last but by far not least is respect for institutions and their forward implications for doing business. In simple terms, a top institution should never engage in unfairly targeting one of its biggest clients. Former central bank governor Sanusi Lamido Sanusi had to come out of retirement to reaffirm that the ruling of the Bankers’ Committee–a consensus-based body comprising all Nigerian banks–remained valid. Why one of the committee’s members has chosen the arduous route of flouting established industry norms, however legitimate its concerns and lucrative the reward, is mystifying to many observers. Specifically, the conduct of its legal counsel has come in for strong criticism and was deemed sufficiently problematic that he was stripped of the prestigious rank of Senior Advocate of Nigeria (it was subsequently restored). Going by the fact that the legal counsel–who among other things, has set up a splinter group of legal practitioners–appears to be involved in another corporate saga amplified in part by his conduct, not much appears to have changed. The potential consequences, such as the erosion of trust, systemic risk, market distortions, legal and regulatory repercussions, and ethical implications, all make a strong case against such actions. Upholding principles of fairness, equality, and transparency should guide banking institutions’ operations to ensure the financial system’s stability and integrity while fostering a conducive environment for all clients to thrive. Put another way, a debt settlement issue should not have to be this acrimonious.

As the Nigerian government makes important strides towards assuring foreign investors, private and multilateral, that it is open for business, it is worth remembering that charity begins at home and domestic investors and captains of industry deserve some love as well. For an emerging market stepping out from almost a decade where the dominant perception is that we are a difficult place to do business, we must always remember that every move, every decision and every headline–good and unwholesome–will be closely watched, logged, assessed and digested.

Effiong is a legal practitioner, management consultant and Head of Research at SBM Intelligence. He writes from Lagos.