By: Tijani Salako.

The Federal High Court in Lagos has ruled that the Central Bank of Nigeria (CBN) acted outside its statutory powers in dissolving the board and management of Union Bank of Nigeria Plc, declaring the January 2024 intervention unlawful.

Delivering judgment on Wednesday in suit number FHC/L/MISC/1377/2025, Justice Chukwujekwu Aneke held that the apex bank’s actions were ultra vires and not in compliance with the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020.

The court consequently ordered the immediate reinstatement of the bank’s former board and management led by Farouk Gumel.

Justice Aneke also restrained the CBN and other respondents from exercising any further powers over the bank’s governance, including restructuring its share capital or altering its ownership structure. He further halted the ongoing recapitalisation process and investor selection programme initiated under the CBN-appointed board.

On the issue of fair hearing, the court held that the applicants’ fundamental rights were breached, noting that they were sanctioned without being given the opportunity to respond to allegations of regulatory infractions arising from a purported special examination of the bank.

The judge found that the applicants’ shareholding was reduced from 100 per cent to 40 per cent and that they were excluded from participating in the recapitalisation exercise without legal justification. He described the actions as indicative of bad faith.

Although the CBN had defended its intervention as part of its prudential oversight citing severe financial distress at the bank, including a negative capital adequacy ratio, a capital shortfall exceeding N224 billion, and a high non-performing loan ratio the court ruled that such regulatory powers must be exercised strictly within the confines of the law.

On jurisdiction, the court held that Section 51 of BOFIA does not shield the CBN from judicial review where it acts outside its statutory powers. It further ruled that the actions of the CBN-appointed board were subject to review, describing them as agents of the apex bank.

The court also dismissed procedural objections raised by the respondents, holding that the applicable rules of court were merely directory and insufficient to defeat the suit.

Justice Aneke noted that the applicants suffered a “continuing injury,” having been excluded from the bank’s management and decision-making processes between January 2024 and December 2025, during which significant corporate actions were undertaken.

On damages, the court acknowledged that the respondents admitted the applicants invested $190 million in the bank but declined to award additional claims in the absence of oral evidence.

The dispute arose from the CBN’s January 2024 intervention, when it dissolved the boards and management of Union Bank, Keystone Bank and Polaris Bank over alleged regulatory breaches and corporate governance failures.

At the time, the apex bank cited provisions of BOFIA, referencing non-compliance with licensing conditions, threats to financial stability, failure to adhere to regulatory directives, and undercapitalisation as justification for its action. It subsequently appointed interim management to take over the affected institutions and initiated corrective measures, including recapitalisation and restructuring programmes.

The move formed part of a broader pattern of regulatory interventions by the CBN in Nigeria’s banking sector. In 2021, the regulator removed the board of First Bank of Nigeria Holdings Plc over governance concerns, while a similar action was taken against Skye Bank Plc in 2016 due to prudential breaches, with the bank’s licence later revoked and its operations transferred to Polaris Bank.

Under BOFIA, the CBN is empowered to intervene in troubled banks, including removing directors where a “grave situation” is identified.