General Hydrocarbons vs. First Bank: How a $225 Million Debt Dispute is Shaking Nigeria’s Oil and Banking Industries

GHL Directors Demand $1 Billion Each from First Bank After Court Lifts Asset Freeze

The ongoing legal tussle between General Hydrocarbons Limited (GHL) and First Bank of Nigeria (FBN) Plc has unveiled a complex web of allegations, counterclaims, and operational intricacies, ultimately sparking a broader conversation about corporate governance, contractual obligations, and the role of financial institutions in Nigeria’s economic ecosystem.

At the heart of the dispute lies a contentious $225 million debt claim by First Bank, which GHL vehemently denies. The oil company has described the bank’s allegations as “befuddling” and “malicious,” framing the narrative as a fundamental misunderstanding—or misrepresentation—of their agreement.

The Genesis of the Conflict

The roots of this impasse trace back to a Subrogation Agreement signed in 2021. This deal was intended to facilitate the development of OML 120, an oil field under GHL’s operations, with First Bank committing financial support in exchange for a profit-sharing arrangement. The agreement was strategic, designed not only to revitalize the oil field but also to help First Bank address its exposure to non-performing loans (NPLs).

Yet, the partnership quickly unraveled. GHL alleges that First Bank’s failure to meet its funding obligations caused significant operational setbacks. These delays, according to GHL, disrupted payments to key service providers like Schlumberger and Baker Hughes and ultimately led to arbitration claims and the loss of critical assets such as the Blackford Dolphin drill ship.

A Battle on Multiple Fronts

The conflict escalated as both parties turned to the courts. First Bank secured a Mareva injunction to freeze GHL’s accounts, while GHL obtained a Federal High Court judgment restraining the bank from interfering in its operations. The legal maneuvering highlights not only the stakes involved but also the fragility of trust in high-stakes financial partnerships.

GHL has criticized First Bank for acting as a “conflicted lender, risk manager, and operator,” accusing the bank of overstepping its role by vetting and approving invoices and appointing a Chief Financial Officer for the company. These actions, GHL argues, blur the lines of accountability and undermine the principles of good governance.

Wider Implications for Nigeria’s Oil and Banking Sectors

This case is emblematic of deeper challenges within Nigeria’s oil and banking sectors. For First Bank, the controversy raises questions about risk management and the sustainability of leveraging oil sector investments to offset financial vulnerabilities. For GHL, the dispute underscores the operational risks that come with reliance on financial partners who may not fully align with the long-term vision of oil exploration and development.

Moreover, the dispute reflects broader systemic issues, such as the efficacy of judicial processes in resolving high-stakes commercial disputes. GHL has decried what it sees as an abuse of judicial processes, pointing to conflicting court rulings as a barrier to swift resolution.

Lessons in Governance and Collaboration

This saga serves as a cautionary tale for corporate Nigeria. It speaks on the need for transparency, clear delineation of roles, and robust dispute resolution mechanisms in partnerships involving significant financial and operational stakes. For stakeholders, it is a reminder that short-term financial fixes, such as leveraging oil sector investments to address NPLs, can lead to long-term reputational and operational challenges.

As the courts continue to weigh in, the outcome of this case will have far-reaching implications. Beyond the immediate financial stakes, the resolution—or lack thereof—will influence investor confidence, regulatory scrutiny, and the future of partnerships between Nigeria’s financial institutions and the oil sector.

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