Union Bank caught in board tussle as recapitalisation ends

…CBN cites systemic risk in Union Bank’s case

The Central Bank of Nigeria (CBN) has escalated its fight to retain control over Union Bank, one of the country’s oldest lenders, filing an appeal against a March 25, 2026, judgment of the Federal High Court in Lagos that nullified its 2024 takeover of the bank and ordered the reinstatement of its former board and management.

The ruling effectively unwinds nearly two years of regulatory control. It throws into question a recapitalisation process that had been underway, leaving Union Bank caught in a boardroom tussle just as the broader banking sector pushes to meet new capital thresholds.

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In its latest filings at the Court of Appeal, the central bank is also seeking a stay of execution of the judgment, warning that allowing the decision to take immediate effect could destabilise the lender and undermine confidence in Nigeria’s financial system.

The dispute dates back to January 2024, when the regulator dissolved the boards of Union Bank, Keystone Bank and Polaris Bank, citing corporate governance lapses, regulatory breaches and what it described as deteriorating financial conditions. A new management team was installed to stabilise operations and drive a recapitalisation plan.

That intervention, however, triggered a backlash from core shareholders, including Titan Trust Bank Limited and affiliated entities, who challenged the move in court, arguing that the apex bank acted outside its statutory powers and diluted their ownership stakes without due process.

After months of legal proceedings, the Federal High Court ruled in favour of the shareholders, declaring the CBN’s actions unlawful and unconstitutional, and ordering the immediate restoration of the bank’s previous board. The court also voided decisions taken under the CBN-appointed management and halted the recapitalisation exercise.

The judgment has created a delicate situation for Union Bank, with competing claims over control and uncertainty over which governance structure should prevail pending the outcome of the appeal.

The central bank, in its appeal, maintained that its intervention was firmly grounded in the Central Bank of Nigeria Act and the Banks and Other Financial Institutions Act 2020, arguing that it acted in response to severe prudential concerns at the lender.

According to the regulator, Union Bank was grappling with a negative capital adequacy ratio, a capital shortfall exceeding N224 billion, and elevated non-performing loans at the time of the takeover—conditions it said posed risks not only to depositors but to the broader financial system.

The CBN argued that the lower court failed to properly interpret provisions of the banking law that grant it wide-ranging powers to intervene in distressed institutions, including removing directors and appointing new management in crisis situations.

It also faulted the aspect of the ruling that restrains it from exercising regulatory oversight over the bank, describing it as an undue limitation on its statutory mandate and a potential threat to effective supervision of the financial system.

As part of its application for a stay of execution, the apex bank is seeking to restrain the reinstated directors and other parties from taking steps to enforce the judgment, including assuming control of the bank, altering its governance structure or interfering with ongoing operations.

The regulator further urged the court to direct all parties to maintain the status quo and refrain from actions or public statements that could destabilise the lender while the appeal is being determined.

At the heart of the case are broader legal and policy questions about the limits of regulatory authority in Nigeria’s banking sector and the extent to which the central bank can act unilaterally in times of financial stress.

For investors, the case raises concerns about the protection of shareholder rights and the predictability of regulatory actions. For regulators, it underscores the challenge of balancing market confidence with the need for swift intervention to prevent systemic crises.

Union Bank has sought to reassure customers that its operations remain stable, but the unfolding legal battle has introduced a layer of uncertainty at a time when the industry is navigating sweeping recapitalisation requirements.

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With the appeal now underway, the outcome is likely to set a precedent that could reshape the relationship between regulators and financial institutions in Nigeria, determining how far authorities can go in stepping into troubled banks without triggering legal and investor backlash.

Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co, said the case is still at the court of first instance, meaning no final decisions have been reached. As a result, it is expected to remain business as usual for the bank until there is greater legal clarity.

According to him, banks are expected to adjust and strengthen their balance sheets to remain resilient, particularly in terms of risk management practices.

Looking ahead, he said the focus for banks is shifting from raising capital to generating sustainable returns for shareholders. This will likely involve expanding loan books, increasing revenue streams, and improving efficiency in deploying assets to drive stronger profitability.

Muda Yusuf, chief executive officer of CPPE, called for a shift in policy focus as the recapitalisation programme draws to a close, urging authorities to prioritise measures that reconnect the banking system to the real economy.

These include scaling up credit guarantee schemes to de-risk SME lending, improving credit infrastructure, incentivising long-term financing, and ensuring that monetary policy transmission leads to lower borrowing costs for businesses. The group also called for efforts to raise private sector credit to at least 30 percent of GDP over the medium term.