Wema Bank Faces N125bn Asset Recovery Suit: A 20-Year-Old Bank Collapse Returns to Court

The Nigeria Deposit Insurance Corporation has taken Wema Bank to the Federal High Court in Lagos over assets and payments linked to Gulf Bank Plc, which collapsed 20 years ago when the CBN revoked its licence in January 2006. The two suits, marked FHC/L/CP/466/26 and a companion case, seek recovery of Banana Island properties valued at about N125.38 billion and a disputed payment of N401 million.

At issue are 12 high-value plots on Banana Island. NDIC, acting as liquidator for Gulf Bank, alleges the properties were acquired through companies linked to Gulf Bank before its collapse. It is asking the court to declare the alleged disposal illegal and to compel Wema Bank to return the title documents or pay their current market value.

NDIC’s case rests on investigations it says show an attempt to strip Gulf Bank of six properties registered to Euston Wenberg Engineering Company Limited. According to a witness statement by Joseph Okolonji, former deputy director and head of NDIC’s criminal investigation unit, the 13,794.145 sqm plots are now valued at about N62.07 billion at N4.5 million per sqm. He alleges Wema Bank presented the assets as sold for N250 million despite having no legal interest, and that no valid interbank deposit justified its custody of the assets.

The corporation also disputes Wema Bank’s claim that the assets were held against a purported interbank placement of N771.79 million linked to Gulf Bank. A 2005 joint CBN-NDIC examination, NDIC says, found no record of such a deposit in Gulf Bank’s books. Regulators rejected Gulf Bank’s later explanation that the funds were investments tied to Bankers’ Acceptances involving Ibom Power Company and Grix Nigeria Limited, citing the absence of placement memoranda, deposit slips or account statements. NDIC further argues that managers’ cheques of N250 million from Access Bank and Intercontinental Bank in 2005 cannot reflect the real value, noting that even one Banana Island plot was worth over N500 million at the time.

A second suit targets another six plots allegedly acquired through Bacad Finance and Investment Limited, later renamed Supra Commercials Limited. NDIC says Gulf Bank held majority shares in the company and used it to acquire 13,979.974 sqm of land, now valued at N62.91 billion, intended for a luxury estate with Shelter Afrique. It alleges Wema Bank took possession and claimed the assets were sold for N524 million between 2006 and 2007, and that it collected N401 million from UBA in 2009 despite liquidation approval of only about N1.63 million as the amount due.

NDIC says it has referred parts of the transactions to the EFCC and will call estate valuer Adebare Esan and legal and security officials who participated in the probe as witnesses.

Wema Bank’s legal team, led by SANs Oladapo Olanipekun, Kehinde Ogunwunmiju and Tunde Afe-Babalola, is challenging jurisdiction. They argue the dispute does not arise from a banking transaction under the Failed Banks Act and that no debtor-creditor relationship exists between the banks. They also contend the case is statute-barred, since the transactions occurred between 2006 and 2007, and have asked the court to dismiss the suits. The matter is adjourned to 25 June.

The case illustrates how Nigeria’s failed bank resolution process can resurface decades later. The Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act gives the Federal High Court jurisdiction over asset recovery by NDIC as statutory liquidator. For depositors and creditors, the statute aims to trace and claw back assets allegedly moved out before collapse. For banks named in such actions, the challenge is proving clean title and contemporaneous documentation for transactions that occurred when record-keeping standards and regulatory oversight were weaker.

The sums involved make this more than a technical dispute. N125bn in Banana Island assets and N401m in disputed payments are material even for a Tier 1 bank, and the outcome will test how far courts are willing to look behind old transactions when documentation is thin and valuations have changed dramatically. It will also signal how aggressively NDIC will pursue historical claims as it seeks to maximize recoveries for depositors of defunct banks.

Until the court rules, the allegations remain unproven and Wema Bank’s jurisdictional and limitation defenses will determine whether the case proceeds to trial on the merits. The hearing in June will clarify whether the court sees this as a matter covered by the Failed Banks Act or as a civil property dispute outside its scope.