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The legal and financial risks facing FirstBank and its lending allies have escalated sharply following the collapse of their attempt to reassign the ongoing Nestoil/Neconde case and the emergence of what could become a $1.8 billion damages claim against the banks.
The setback comes on the heels of a Supreme Court judgment that dealt a significant blow to the lenders’ litigation strategy. In its decision in Neconde Energy Ltd. v. FBNQuest Merchant Bank Ltd & Ors., the apex court rejected efforts that sought to halt proceedings and questioned the motives behind attempts to delay a case originally initiated by the lenders themselves.
Relying on that judgment, the Honourable Chief Judge reportedly dismissed the application for reassignment, finding no basis to remove the trial judge. The decision has effectively shut the door on what critics described as an attempt to derail the proceedings.
With that strategy defeated, attention is now shifting to the potentially enormous consequences facing the banks.
Nestoil and Neconde are commencing the process of pursuing approximately $1.8 billion in damages against FBNQuest Merchant Bank, First Trustees, FirstBank, UBA, Access Bank, Zenith Bank, the Receiver-Manager and other parties over alleged disruption of oil production operations.
The companies are expected to contend that actions taken by the lenders and their Receiver severely impaired production activities, causing output to fall from about 60,000 barrels per day to below 40,000 barrels per day, while also disrupting critical drilling and field development programmes.
Industry observers note that if successfully pursued, the claim could rank among the most significant damages actions arising from a commercial banking dispute in Nigeria’s oil and gas sector.
Adding to the mounting legal pressure, Drawcok Estate Limited has already filed a N100 billion damages suit against FBNQuest Merchant Bank, First Trustees, the Receiver-Manager and others over the alleged wrongful takeover and occupation of its Victoria Island properties.
The growing wave of litigation marks a dramatic reversal in fortunes for the lenders. What began as an aggressive debt recovery exercise is increasingly exposing the banks themselves to substantial legal liability, with claims now running into billions of dollars and tens of billions of naira.
As the Supreme Court’s criticism continues to reverberate through the proceedings, the failed reassignment bid may ultimately be remembered as the moment the dispute shifted from an enforcement action against Nestoil to a potentially costly reckoning for the banks behind it.
