• Calls for transparency in Nigerian financial system

Nestoil, yesterday, stated that plans are underway to appoint 10 local and international forensic auditors to audit its accounts in Nigerian banks and to verify loan claims. This, according to court filings, became necessary.

In the court filings, Nestoil alleged the refusal of FBNQuest Merchant Bank Limited to release its loan account statements despite multiple requests. The alleged refusal has sparked growing concern about transparency and compliance within the Nigerian financial system.

Court documents reveal that Nestoil repeatedly followed up with FBNQuest and the lenders, through emails dated February 6, 2024; March 12, 2024; March 25, 2024; April 20, 2024; and June 1, 2024, requesting statements of accounts, but neither FBNQuest nor any of the lenders provided the statements of accounts to Nestoil.

The disputed debt claims, based on unverified figures, exceed $1.01 billion and N430 billion. As the Facility Agent, it claimed that FBNQuest was expected to act on behalf of all lenders in the syndicated loan in administering the loans, including coordinating communication between Nestoil and the lenders and maintaining transparency.

However, Nestoil alleges that the bank did not fulfil its fiduciary duties. Instead of ensuring transparency by providing the bank statements requested by Nestoil to enable the company to verify its payment obligations to the lenders, FBNQuest rushed to court to obtain ex parte Mareva and receivership orders freezing its assets and shares, bypassing due process and failing to respond to repeated demands for information by Nestoil. Nestoil has therefore demanded a proper forensic reconciliation of its loan accounts with the lenders.

“The amounts presented as representing Nestoil’s debt are incorrect and lack any proper basis. Only a proper forensic reconciliation would reveal whether we are indebted and the precise amount, if any,” the company stated in its court filings.

Critics argue that the Mareva and receivership orders have disrupted Neconde’s operations, considering that production on OML 42 has recently improved, generating significant revenue after years of operational challenges.

Foreign lenders and some major banks that granted loans to Neconde, which is also affected by the Mareva and receivership orders, have filed papers in court to challenge FBNQuest’s actions.

The action of FBNQuest and FBN Trustees in failing to provide bank statements to Nestoil despite repeated requests and obtaining ex parte Mareva and receivership orders against Neconde, has raised concerns about the impartiality of facility agents and security trustees that are affiliates of any of the lenders in syndicated loan transactions in Nigeria.

“Such disputes send the wrong signal to international investors. If agents can manipulate lending structures to seize assets, global financiers will hesitate to fund indigenous companies in syndicated or club arrangements with Nigerian banks,” said a senior banker.

Neconde maintains that its inclusion in FBNQuest’s orders is illegal, as it is already subject to separate Federal High Court proceedings. Legal experts warn that ex parte asset freezes in strategic sectors such as oil and gas can destroy value rather than preserve it.

“The courts must balance creditor rights with economic stability,” a Lagos-based commercial lawyer said. “Justice should not become a tool for asset conquest.”

The dispute has broader implications for Nigeria’s investment climate. With global investors wary of regulatory and economic uncertainty, incidents like the Neconde-FBNQuest saga could deter foreign lending, slowing investment in key sectors such as energy, infrastructure, and industrial development.

“No investor wants to operate in a jurisdiction where their lending partners and agent can become their adversary,” an international banker said.
Calls have intensified for stronger oversight from the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) to ensure facility agents act transparently and in the interest of all lenders and borrowers.

Legal practitioners are also urging judicial restraint in granting far-reaching ex parte orders that can disrupt operations and threaten employment.

“The courts must ensure that creditor enforcement does not come at the expense of economic stability,” a financial lawyer said. The Neconde-FBNQuest dispute highlights vulnerabilities in Nigeria’s financial system, raising questions about fiduciary responsibility and judicial overreach.

While FBNQuest may have acted within its rights, Nestoil alleges the optics suggest a calculated attempt to seize a profitable oil asset under the guise of debt enforcement.

“If unchecked, such practices could derail indigenous businesses and deter foreign investment, underscoring the urgent need for transparency, due process, and accountability in Nigeria’s financial and judicial institutions”, the firm added.