Category Archives: Special Feature

“Etisalat and The Illogic of CBN and NCC’s Intervention”: A Rejoinder, Reflection and Call to Action.

“…In essence, it is clear that what the CBN and the NCC have done, is not to interfere with the corporate governance of Etisalat (now 9mobile), but to play a key role in ensuring the protection of the overall value of the firm, and the larger stakeholder interest…” Sanford U. Mba.

Sanford U. Mba

Sanford U. Mba, Doctoral researcher on comparative corporate insolvency and restructuring law at Central European University(CEU) writes the opinion below from Budapest.


This opinion responds to the opinion by Uche Doris (the author) titled Etisalat and The Illogic of CBN and NCC’s Intervention and published in the Leadership Newspaper of 25 June, 2017. This present opinion is a principled disagreement with the author’s perception of the role of both the CBN and the NCC as they intervened in the decision of Etisalat’s lending syndicate to commence insolvency proceedings (receivership) against Etisalat, pursuant to their ex ante financing agreement. The author highlighted amongst other things, the role and response of regulatory agencies as the events leading up to the divestment of the foreign and local equity stakeholders played out.

I personally find the opinion piece refreshing. First because it provides the only enlightened monologue on what may well be the biggest case of financial distress between the first and second quarter of 2017, which dangerously dangled on the precipice of the commencement of an insolvency proceeding and which attracted the intervention of Nigerian state institutions (CBN and NCC). Secondly, it brings to the fore, the urgent need for the reform of Nigeria’s insolvency law regime, to reflect international concerns for the rescue not just of distressed businesses, but businesses which are functionally socially important. Such businesses have been brilliantly described by Shlomit Azgad-Tromer as socially important non-financial institutions. The reader may also wish to refer to my earlier opinion titled “Recession, Preventive Restructuring and the Nigerian Draft Insolvency Bill: Lessons from the EU?” published 6th September, 2016, in the Thisday Newspapers. In that opinion, I addressed Nigeria’s current insolvency law reform efforts and the need for a prophylactic recourse regime that address financial distress of otherwise viable corporates.

The author of the piece, (subject of this rejoinder) does appear to loathe the “subtle resistance” of the CBN and NCC, thereby ultimately frustrating the desire of the lenders consortium, through their designated representative (United Capital Trustees Limited) to appoint a receiver/manager over the Etisalat. What the CBN and of course the NCC has done is something for which both institutions deserve some applause. The reasons for this are as follows.

Nigeria is still in the process of enacting a corporate insolvency legislation. The Nigerian Senate has already passed a version of the legislation. The need to pass this legislation cannot be overemphasized (kindly refer above mentioned opinion in the Thisday Newspapers). The insolvency options currently provided for in the Companies and Allied Matters Act (CAMA) are inordinately skewed to favour the creditors. Take the receivership (the preferred choice of the creditors, as reported in the media). Although the receiver, (if also appointed manager) should do more than cater to only the creditors, in practice, hardly does any other constituency benefit from the appointment of the receiver. Also in practice, the remit of the receiver will be to recover the debt owed to the appointing secured creditors. This desire of the receiver to recover for the secured creditors inadvertently evinces a pro-liquidation bias which ultimately could not have boded well for the rescue of a distressed, but essentially viable business enterprise such as Etisalat.

In fact, it is submitted here that until we are able to see the enactment of an insolvency regime which provides for a robust corporate rescue component, the ad-hoc intervention of the CBN may continue to provide an option to the currently liquidation oriented regime afforded under CAMA.

One question a percipient reader may ask will be: what has the CBN (as well as NCC) achieved through their action?

Vested with the responsibility of ensuring the overall stability of the economy, it may well be uncharitable to deny the strategic role which the CBN in conjunction with the NCC played with regard to the smooth easing out of the majority shareholders of the debtor. This has been achieved without doing much to destroy the going concern value of Etisalat. In fact, it has not only avoided a crisis of confidence, it has also contributed to helping the company retain value. It is widely acknowledged that bankruptcy may not be an efficient means to resolve the distress of socially important non-financial institutions, which one may be inclined to think Etisalat as one. Although the author argues that the signaling to foreign investors is negative, it is not necessarily so. Assuming without conceding this, the consequence of appointing s receiver over Etisalat may well have direr consequences for the debtor and other stakeholders in the firm. How so?

As the news of insolvency begins to gain ground, and as the receiver swings into action to liquidate the assets of the debtor, the sale of the assets of a debtor will most likely be priced at an undervalue. It is often for this reason that businesses over which receivers have been appointed hardly ever emerge from the receivership. The author does cite insider sources which point out that the intervention of CBN was to avoid the endangerment of the efforts by the government to attract foreign direct investment (FDI) for the country. This may not have been so elegantly stated. It may well have made better sense if we relate this to the desire of the regulators to attract foreign (and local) investors for Etisalat. Bearing in mind that the regulators understand the implication of Etisalat going into receivership, and given its interest in ensuring that the company continues as a going concern, the regulators deserve some credit for sticking out their heads first, in preventing a piecemeal sale at depressed value, and second, to keep the debtor intact in order to attract foreign equity investors for the distressed corporate.

The CBN and NCC have managed to preserve jobs of employees and protected connected trade creditors. It is no news that Nigeria is still trying to emerge from one of its worst recessions in its modern history. At a time when many Nigerians are struggling to make ends meet, the appointment of a receiver, and the attendant job losses and the loss for interconnected businesses that survive on their relationship with Etisalat require consideration in the decision to commence the receivership. Nigeria is in too much trouble already for the regulators to sit back idly and allow such a situation play out. It is therefore submitted that the CBN as well as the NCC deserve nothing but commendation for its timeous and principled response to what would have added to the continuing economic challenges.

The author also makes a case for a strict laissez faire approach to the dispute, so that the CBN and NCC does not interfere with the financing agreement which authorized the lenders to opt for the appointment of a receiver. In the words of the author, the government ought not to be “involved in trying to save Etisalat or any other company from the financial mess in which they find themselves.” The temptation is very strong to agree with the author. Indeed, when we think about justice in the realm of businesses, what comes to mind is certainty. In this context, the respect of the ex-ante bargain between the debtor and its creditors. However, even such rules of justice may well admit of certain concessions and exceptions. This is even more so where the dynamics are such that the corporate entity serves a social utilitarian purpose within the economy. The central banks of most developed countries have not shied away from taking steps to ensure that viable socially important non-financial institutions are not allowed to go under. In such situations, bailouts have been provided. In the face of the hue and cry against the use of taxpayer’s monies to rescue such companies, the role played by the CBN and NCC even becomes the worthier of applause. Thus, while the CBN has not involved itself financially, it has prevented what would have been a piecemeal disposition of the assets of the debtor, with the attendant losses that would have followed.

Although the author considered the intervention of the CBN and NCC as futile. On the contrary, I think it has steered the parties away from a course that will have resulted in less value for the other stakeholders in the survival of the firm. As firms begin to travel down the road of insolvency, the recovery value for junior and unsecured creditors may be worth next to nothing, while shareholders may have nothing at all left in terms of their equity value. The senior creditors and secured creditors on the other hand seem to be the claimants who may sail above the waters, depending on the value of the firm. This is essentially the result of our current system of receivership. But the thinking in corporate bankruptcy has evolved beyond this, to ensure that viable businesses with going concern value may be allowed to restructure their debt and emerge from bankruptcy. So far as the receivership system which obtains in Nigeria will have yielded this somewhat unfair result, the intervention of the CBN and the NCC is beyond reproach. It may well have appeared that the agencies applied their discretion arbitrarily. However, we cannot discount the fact that they have invariably succeeded in halting a descent down a slippery slope which would have further hurt an already ailing economy.

Let us even agree that the management of Etisalat has done a bad job with the management of the debtor through the harsh economic situation. The market for corporate control has been known to discipline errant or underperforming corporate managers. Given the dynamics, and the various interests which a modern corporate represents, I dare say that the market for corporate control does a more efficient job at penalizing management, more than the receivership option presently available in Nigeria’s insolvency regime. This again has played out as the management of Etisalat has been eased out. In essence, it is clear that what the CBN and the NCC have done, is not to interfere with the corporate governance of Etisalat, but to play a key role in ensuring the protection of the overall value of the firm, and the larger stakeholder interest.

Finally, the author argues that what the CBN has done is to protect a defaulting debtor at the expense of an investor. It is however argued here that this is not necessarily so, in the light of the arguments outlined above. Besides, the option to seek equity investors for the firm will eventually result in the repayment of the senior lenders and also importantly, it will ensure that the distressed debtor continues to operate as a going concern.

In the light of the foregoing, stakeholders must begin to pay closer attention to the ongoing reform efforts of insolvency law in Nigeria. Although the Nigerian Senate has done its bit in passing a piece of legislation, it is incumbent on stakeholders (creditor interest groups, insolvency practitioners, consumer advocacy groups, labor groups, the academe, etc.) to closely follow this process. This way, we may well see an end to ad-hoc interventions by regulators.

Featured image credit: 9mobileThisDay.


Megan Chapman is a Co-Director, Justice & Empowerment Initiatives – an Organisation that stands for the empowerment of the poor and marginalised individuals and communities in conjunction with Nigerian Slum/Informal Settlement Federation. She is a lawyer and a scholar of high repute. Megan holds a J.D. from American University Washington College of Law (summa cum laude), where she was a Public Interest/Public Service scholar and the co-Editor-in-Chief of the Human Rights Brief. She holds a B.A. in history from University of Chicago (high distinction). On 23 March, 2017, Megan spoke with Stephen Azubuike, throwing more lights on the issues of displacement of thousands of inhabitants of Otodo Gbame Community (an ancestral Egun fishing settlement in Lekki) by the Lagos State Government in collaboration with the Nigeria Police as well as the threat of forcible eviction faced by other waterfronts in Lagos. In this Special Feature of Stephen Legal Blog, we bring to you details of the Extended Interview below.

We understand that on 9th of October 2016, the Lagos State Government (LASG) announced the intention of the Government to demolish “shanties” along waterfronts across the State and gave the residents 7 days to vacate the areas. Prior to this announcement, was there any form of official notice issued by the LASG?

No. There was none. Even the 7 days purported notice that was announced was unreasonably short and imprecise – it did not name specific communities or provide any statutory basis for the threatened demolition. As a result of the announcement and given that the threat of demolition was broad, covering many areas, we identified at least 40 communities and estimated over 300,000 residents that might fall under the threat and be at risk of eviction. The word “shanties” used by the Government in referring to these waterfront communities is rejected. The word has no legal definition. Moreover, it is derogatory – what may look like a shanty to one person is anothers home.

So, it was this threat of eviction that led to the filing of the fundamental rights action at the Lagos State High Court, Lagos Division, on behalf of some of these communities against the LASG and the Nigeria Police in – Suit No. LD/4232MFHR/2016 – Akakpo  Agemo & 38 Ors v. A. G. Lagos State & 3 Ors?

Yes. However, we did not immediately go straight to Court. Prior to the filing of the suit, 20 threatened communities wrote a letter demanding retraction of the eviction threat made by the LASG. They also staged two peaceful protests but received no attention from the Governor. The suit was filed when the Lagos State Government issued a press statement indicating its intent to continue with the threatened action.

We are aware that following an urgent application for injunction filed along with the suit, the Court made an interim order of injunction  on 7 November, 2016 restraining the the LASG and the Nigeria Police from carrying out any demolition of the waterfronts. Is this Order still subsisting?

In a matter brought by way of Fundamental Rights (Enforcement Procedure) Rules, 2009, such an interim order lasts until the hearing of the substantive suit. Sadly, even in the face of the subsisting Order, between 9-10 November, 2016 the LASG in collaboration with the Police, in outright disregard of the Court Order demolished the Otodo Gbame Community and forcibly evicted over 30,000 residents by way of arson and the use of excavators. About 11 people died as a result of the incident including children who drowned in the water while running for safety. The first phase took place in the morning of 9 November 2016 in which a violent arson attack facilitated by the police destroyed about a third of the community. Then, after midnight, in the wee hours of 10 November, an excavator came back accompanied by the police and continued demolishing the remaining two-thirds of the community through the night until mid-day, leaving only water structures unaffected.

Which other community/communities aside Otodo Gbame (and Ilubirin demolished on 15 October 2016) has suffered any demolition fate since the recent eviction threat?

None, since the eviction threat by the LASG. However, there have been others in the past.

The LASG denied responsibility for the fire outbreak of 9/11/2016 at Otodo Gbame   claiming that the fire was as a result of the ethnic clash that occurred between the Egun and Yoruba residents within the Community. What is your take on this?

This is not true. Note that this denial came a week after the demolition, after a lot of outcry. Although we cannot say precisely what started the fire, what is clear from all eyewitness testimonies was that the Police were helping the fire to spread and stopping resident from quenching the fire. Some officers were heard saying the fire must not be put out, that the whole place should burn. After the first phase of arson, the Police PRO also stated that the Lagos State Building Control Agency (LASBCA) under the Ministry of Physical Planning and Urban Development was scheduled to subsequently come to the area to demolish what was left of the community. It was less than 6-7 hours after this announcement that an excavator showed up in the community and began demolishing in the middle of the night. A colleague from Amnesty International also called the PRO of LASBCA on 10 November and asked if they were involved in the demolition and he said, Of course.All this evidence supports that the Police and the Government were responsible for the forced eviction.

Demolitions of otodo gbame

Community demolition

In fair consideration of the need to protect the fundamental rights of citizens and the corresponding responsibilities of the Government to ensure the welfare and safety of the people, the Court by its Ruling of 26 January, 2017 directed parties to explore amicable settlement through mediation at the Lagos Multi-door Courthouse (LMDCH) and ordered that status quo be maintained. What are your expectations at the LMDCH?

It is hard to say right now. The communities have always believed in and requested for dialogue. In fact, before the renewed demolitions in Otodo Gbame, we were feeling optimistic. There was a session at the LMDCH on 9 March, 2017. The next date is 29 March, 2017. However, we do not know what will happen on that date given the recent demolition activities carried out by the LASG in Otodo Gbame on 17/3/2017 and 21/3/2017 in violation of the court order that the parties should maintain the status quo. On 22/3/2017, another attempt at demolition was made but the people resisted them.

It appears the LASG has not denied the subsequent demolition exercises at Otodo Gbame (even though the  Order of injunction and maintenance of status quo subsist). In a recent report however, the Government through the Commissioner for Information and Strategy, Mr. Steve Ayorinde, denies flouting any Court order and argued that since the Order for maintenance of status quo subsists, it would be unacceptable for the residents to return to the area or to erect structures and perpetrate unsanitary and environmentally dangerous conditions. What do you say about this and the interpretation by the Government?

Status quo ante bellum is a Latin phrase which means “the state existing before the war”. So when did this “war” or conflict began? It began with the 9 October 2016 threat by the Governor when all the Applicant communities were still intact. This was the situation the Applicants approached the court in order to preserve. The State Government cannot hide behind an illegal act undertaken in violation of a court order and then foist the status quo post bellum on the Applicants. Second, remember that Justice S. A. Onigbanjo on 26 January 2017 found that demolitions on short notice without provision of alternative shelter constitute cruel, inhuman and degrading treatment in violation of the right to dignity enshrined in Section 34 of the 1999 Constitution. It would be completely incongruous for the same judge to order the Applicants who had been unlawfully evicted and rendered homeless in violation of a court order to remain homeless for months until the conclusion of the court case. Finally, the March 2017 demolitions have primarily targeted at areas of houses on water not touched previously. Therefore, it is the Government that is in disobedience of the Order of Court.

Megan Chapman explaining more

Again, the LASG has come up with their reasons for the demolitions which are to forestall environmental disaster and another incident like the one that allegedly led to the fire of November 2016; and the overriding public interest to ensure that the waterfront area is free from environmentally injurious and unsanitary habitation. Is it true that the waterfront areas are environmentally injurious and uninhabitable?

So many factors contribute to environmental hazards generally. The waterfronts are not excluded from the wide-spread environmental pollution in the State. Even the mismanagement of waste due to the lack of sewage system in the city and ground water pollutions from all around the State all have their impact on the waterfronts. Be that as it may, we are working with the communities on some projects to improve sanitation and solid waste management, amongst others. For instance, this year in partnership with the Nigerian Slum / Informal Settlement Federation, we are supporting communities to build improved toilets that utilize new technology to contain and process human waste in the absence of a sewage system. Otodo Gbame was meant to be one of the participating communities.

What is your take on the assertion by the LASG that recent kidnapping incidents are justification for doing away with the waterfronts?

The residents of the waterfronts are not criminals as the Government would want the public to believe. Furthermore, demolition of entire communities is not the solution to security threats and challenges and there is no law that authorizes the government to carry out demolitions of entire communities in response to insecurity. The only law I am aware of that authorizes demolition in response to crime is under some anti-kidnapping laws, in which buildings used to hold kidnapping victims can be demolished as a penalty after trial and conviction of the accused. Even if there were criminals living in the waterfronts, do demolitions remove them from society? If the Government is sincerely concerned about security, the answer is to investigate the security threats, arrest persons suspected of involvement, and if the evidence suffices, prosecute them and allow them to face the penalty prescribed by law. Finally, the communities actually have mechanisms in place to secure their communities and have tried to partner with local police stations to improve security of their communities. The biggest challenges they face is corruption in the police force, whereby suspects they arrest and hand over to police are often released without charge after someone pays a bribe. The Government should partner with communities to strengthen community policing and root out corruption in the police force to ensure a more secure society.

This question of sincerity on the part of the Government brings me to the claim by the LASG of having no interest in Otodo Gbame and other communities, other than to ensure that the delicate ecosystem of the waterfronts remains safe, clean and secure. Do you believe this?

The purpose of environmental protection is to enhance human life; therefore environmental protection measures must be carried out in line with human rights protections. It is shocking that the Government would try to use environmental protection to justify mass human rights violations. In terms of whether there are other interests, we all know that the waterfront property in places like Lekki has high value and we believe there are private developers who are eager to take over the land once it is cleared by the LASG. For instance, we understand that the Elegushi Family is interested in building a huge luxury development known as “Imperial International Business City,” which we believe would be built around the Otodo Gbame community, and the residents are seen as an obstacle to this project.

The LASG has expressed willingness to go into mediation with the communities insofar as their demands are reasonable and lawful. What are the specific demands of these communities?

First, an end to forced evictions and demolitions! It is unlawful and not the answer to any of the problems sited as excuses for the threat of eviction of the waterfronts. We are also willing to look into the Government’s concerns and propose solutions that do not involve demolition and forced evictions. For instance, if the concern is security, we propose strengthening community policing. If the concern is the environment, we propose community-government partnership to address environmental problems and improve environmental management. If the concern is physical planning and the quality of housing, we are proposing community-led in situ upgrading in partnership with the Lagos State Urban Renewal Agency.

Megan Chapman Interview

Are you aware of any other specific steps being taken by the United Nations Special Rapporteur on Adequate Shelter, Amnesty International, etc to save the situation?

These international institutions all have their respective mandates. Amnesty International has publicly condemned the acts of the LASG. I am aware that the UN Special Rapporteur on Adequate Shelter has done a confidential communique to the Nigerian Government, which should have been forwarded to the Lagos State Government for reply. Usually, the Special Rapporteur gives some time for reply before publishing the results of her investigation.

You had reasonably canvassed that partnership and collaboration between communities, civil society, and the Government is the best way of solving social and developmental problems that face the city and not by demolition and forced eviction. Can you elaborate more on how this partnership and collaboration can work?

Like I said earlier, the communities are willing to consider the concerns of Government if well articulated. But the Government must stop forcible evictions and demolitions. The communities are ready to work out and agree on solutions with the Government. For instance, through community policing, the communities will assist in tackling the issue of security. Although we must say that one of the challenges here is the level of corruption in the Police which makes it possible for arrested suspects to escape justice and the wrath of the law after being handed over to the Police. Furthermore, the communities are willing to support projects for solid waste management as well as sanitation and in situ upgrading.

What is your message to the LASG?

The LASG should stop forcible eviction and demolitions and show more respect and regard for human life and the rights of citizens to adequate shelter. The Government is not being asked to sanction illegality, contrary to the feeling expressed that the Government is being stampeded or blackmailed to abandon its constitutional responsibilities. The communities are not asking the Government to build houses for them. They are asking the Government to help them get security of tenure – protection against forced eviction – so they can invest in improving their communities and for the Government to bring in the basic services and approve layouts. The major problem with any proposed partnership, however, is that there is a major gap in trust and the Government should be mindful of this. Yet the communities are still willing to reason with the Government for a mutually beneficial understanding.

LASG at scene of demolitions

Is there anyway you think the Federal Government can assist?

Sure. The Federal Government should relate with the LASG to find a more meaningful solution to the issue. Matters of this nature are within the jurisdiction of the State. However, the Federal Government should come in to save the ugly situation which is not good for the image of the country. I know about the national policy on slum development but it was not concluded for implementation, to the best of my knowledge.

Thank you, Megan. It’s been a pleasure chatting with you.

Stephen and Megan

Blogger’s Note:

It is our utmost expectation that the LASG would hearken to the cries of these communities to see about a resolution of the crisis. Human life is highly valuable and the dignity of citizens must be respected, protected and preserved at all times.

Otodo Gbame Protests

Our chat with Megan turned towards a mention of certain notable legal principles as judicially espoused. In the above unreported case of Akakpo Agemo & 38 Ors. v. A. G. Lagos State & 3 Ors. – Suit No. LD/4232MFHR/2016, Onigbanjo, J. reasoned: “…I think that irrespective of the Respondents’ stated security related and other reasons for justifying the eviction/threatened eviction of the Applicants from their homes as averred in the Counter-Affidavits filed herein, in as much as those reasons do not derogate from the fact that the Applicants are nonetheless citizens of Nigeria who are constitutionally protected from cruel and inhuman/degrading treatment by Section 34(1)(a) of the 1999 Constitution of Nigeria (as amended)… I find the eviction/threat of forcible eviction of any citizen from his home at short notice and without any immediate alternative accommodation before being evicted from his current abode totally undignifying and certainly inhuman, cruel and degrading…”

Furthermore, we noted the principle that forceful demolition of property can properly ground an action on fundamental rights enforcement. This was the position of the Court of Appeal in Adu & Ors. v. Lagos State Task Force on Environment and Special Offences Unit &Ors. (2016) LPELR-40060 where the Court discountenanced a preliminary objection against such suit and jettisoned the argument that such action was predicated on title to land and that to that extent, cannot be rightly commenced vide a fundamental rights procedure.

It is our position that all parties including the Government must at all times abide by orders and directives of the courts. In the case of Ezekiel Hart v. Ezekiel Hart [1990] 1 NWLR (Pt. 126) 276 at 297, paras. C-D, Nnaemeka Agu, JSC (as he then was) stressed: “…I would like to state that obedience to orders of court is fundamental to the good order, peace and stability of the Nigerian nation. The ugly alternative is a painful recrudescence of triumph of brute force or anarchy – a resort to our old system of settlement by means of bows and arrows, machetes and guns or, now, even more sophisticated weapons of war. Disobedience to an order of court should, therefore, be seen as an offence directed not against the personality of the Judge who made the order, but as a calculated act of subversion of peace, law, and order in the Nigerian society. Obedience to every order of court is therefore a duty which every citizen who believes in peace and stability of the Nigerian State owes to the nation…”

Also, in SERAP v. Federal Republic of Nigeria (2002) 2 CHR 537 at 562 (cited by Femi Falana, SAN in his article, “Illegality of Houses Demolition in Lagos“), the African Commission on Human and People’ Rights remarkably stated: “At a very minimum, the right to shelter obliges the Nigerian government not to destroy the housing of its citizens and not to obstruct efforts by individuals or communities to rebuild lost homes. The state’s obligation to respect housing rights requires it, and thereby all of its organs and agents, to abstain from carrying out, sponsoring or tolerating any practice, policy or legal measure violating the integrity of the individual or infringing upon his or her freedom to use those material or other resources available to them in a way they find most appropriate to satisfy individual, family, household or community housing needs.