SEVEN commercial banks in Nigeria face several court cases amounting to N14.18 trillion claims against them.

The ICIR analysis of some banks’ audited annual reports and financial statements for the year ended December 31, 2023, revealed that the banks included Access Holdings, Zenith Bank, United Bank for Africa (UBA), Guaranty Trust Holding Company (GTCO), Stanbic IBTC Holdings, Fidelity Bank, and Wema Bank.

It showed that the number of court claims against the banks surged by 460.47 per cent compared to N2.53 trillion claims in 2022.

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The findings indicated that the court cases were related to alleged errors, omissions, and breaches of agreement.

Access Holdings is currently involved in 267 court cases: UBA, 1,649; GTCO, 1,546; Stanbic IBTC, 416; Fidelity Bank, 72; while Zenith Bank and Wema Bank did not disclose the numbers.

Despite the banks’ insisting the court cases would not impact their financial positions, shareholders’ responses suggest the claims could wipe out their total equity.

Total equity is the value left in a company after subtracting total liabilities (what the banks owe) from total assets (what the banks own).

The ICIR reports that Access Holdings has the highest claims, amounting to N11.3 trillion against it, representing 79.69 per cent of the amount claimed against the seven banks.

With only N2.19 trillion total equity, Access Holdings stated that it had already made a provision of about N3.46 billion for the claims despite insisting that the numerous court proceedings would not adversely affect its financial position.

Zenith Bank followed with N1 trillion claims against it; UBA, N986.247 billion; GTCO, N599.2 billion; Stanbic IBTC, N275.274 billion; Fidelity Bank, N11.74 billion; and Wema Bank, N9.47 billion.

Relative to 2022, Zenith Bank faced N967 billion; UBA, N666.12 billion; GTCO, N609.5 billion; Stanbic IBTC, N264.84 billion; Fidelity Bank, N12.06 billion; and Wema Bank, N8.33 billion court claims.

Why court cases against banks are rising

A legal expert, Rose Adima, told The ICIR that banks recorded high court claims in 2023 for several reasons.

According to her, there was a sharp rise in fraud cases against deposit money banks in Nigeria, amounting to about N5.79 billion in losses in the second quarter of 2023, representing a staggering 1,125 per cent rise compared with N472 million lost in the first quarter of that year.

“Naturally, bank customers will not take this lightly with the banks. Banks were sued to recover the deposits of customers affected by fraud.”

She also attributed the surge in court claims against the banks to the lack of appropriate legal advice banks receive to settle legitimate customer claims.

“It is found that banks need to seek appropriate legal advice or get the wrong ones when deciding whether or not to prosecute specific customer claims. At the end of the trial, banks are made to pay higher monetary damages/compensation as atonements for their wrongs. This was the case in 2023.”

Adima said banks’ unbridled compliance with regulatory bodies’ demands and staff incompetence also expose them to defamation claims and breach of contractual relationships.

“In most cases, banks need to check whether the demands of regulatory agencies like the Central Bank of Nigeria (CBN) and the Economic and Financial Crimes Commission (EFCC) comply with the law before acceding to their requests. This sometimes backfires, as customers go after the banks and the regulatory authorities.”

She added, “Some incompetent bank staff have incurred liabilities for the banks due to their incompetence in handling operational matters.”

Banks’ indictment on financial fraud

In March this year, the EFCC indicted the banks as being involved in about 70 per cent of the financial crimes in Nigeria.

The EFCC chairman, Ola Olukayode, disclosed this at the 2023 annual retreat and general meeting of the Association of Chief Audit Executives of Banks in Nigeria (ACAEBIN) in Abuja.

He said the banking sector was increasingly becoming a cesspool of fraudulent activities and noted that banking fraud was inside and outside-related.

Inside-related fraud comprises outright selling customers’ deposits, authorising loan facilities, forgery, and other unhealthy and criminal practices. In contrast, outside-related ones include hacking, ATM fraud, and conspiracy.

In the review year, for instance, Access Bank reported 6,634 fraud and forgery cases that resulted in N8.61 billion, with N6.15 billion incurred as an actual loss. This represents a 40 per cent increase from N1.44 billion the bank incurred in 2022.

While Fidelity Bank posted 3,079 fraud and forgery cases worth N3.83 billion, with an actual loss of N2.094 billion, Wema Bank recorded 1195 fraud and forgery cases worth N1.14 billion, which resulted in an actual loss of N685.595 million.

To curb the menace, the EFCC boss suggested that ACAEBIN monitor banks’ financial activities, compare actual and budgeted revenue with expenses, and carry out periodic reviews and checks, among other things.

Call for special commercial court

There have been worries within the financial corridors about rising cybercrime losses, even as bankers anticipate a special commercial court to deal with backlogs of financial-related cases.

In November 2023, the President of the Chartered Institute of Bankers of Nigeria (CIBN), Ken Opara, suggested the creation of a specialised court to exclusively deal with commercial and financial cases as opposed to having divisions within the existing court structure when he spoke at a programme organised by the CIBN in collaboration with the National Judicial Institute (NJI) in Abuja.

He said cases needed to be speeded up and that much work was to be done in setting up a special court for commercial and financial cases that would handle financial matters.

Shareholders express worries

The National President of New Dimension Shareholders, Patrick Ajudua, told The ICIR that shareholders are worried about the magnitude of court cases involving banks.

He said, “Yes, litigation can arise from normal business transactions, but much depends on the bank’s ability to use out-of-court settlement if both parties agree.”

He stressed that the implication of always resorting to court resulted from the mounting claims against the bank, which could seriously affect the shareholders’ fund.

“So, we employ the bank to always seek alternative dispute resolution to minimise the cost of litigation,” Ajudua maintained.

Also, the national chairman of the Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, said some cases might be frivolous and not prosecuted.

“I am not bothered knowing fully well that some die or fissile out as the case may be, while some will make some impacts; there is nothing to worry about,” he said.

Okezie noted, however, that court cases are compelling banks to make some provisions available in their books.

“It is not every case that banks will incur costs, but we must also advise them (banks) to make sure they carry out their assignments with their customers with ultimate care so as not to incur the wrath of those customers who may be at fault and would be the first to drag the banks to courts, hoping to make fraudulent claims on the banks and believing that if they do so, they will win, and the courts will award those costs to them.

“I will also advise them to approach reputable law firms to prosecute such cases, not necessarily SANs (Senior Advocate of Nigeria) where they will spend big money as fees; that is where the spending starts,” he urged.