Banking
REVEALED! Untold story of how Diamond Bank collapsed

…The Actis, Alex Otti, Nestoil, GT Bank connection
BY KAZIE UKO
The story of how the erstwhile Diamond Bank collapsed continues to unfold. But by far the biggest revelation so far of how the bank which was rated by the Central Bank of Nigeria (CBN) as one of the seven Systemically Important Nigerian Banks that are too big to fail, is the one made by journalist, Prince Emeka Obasi, publisher of Business Hallmark newspaper, in the current edition of the paper.
Obasi, in a three-part series titled, ‘The Diamond Bank Sale and Paschal Dozie’s Moral Burden’, gave a riveting account of never-before-revealed insider story of what led to the self-destruction and final annihilation of one of Nigeria’s most promising new generation banks.
“By 2014, Diamond bank had attained the peak of its meteoric rise. The broad expectation was that it would morph into a major financial power house, right on the heels of the big five – Zenith, GT Bank, FirstBank, UBA and Access. But then, thunder struck and Alex Otti (Managing Director/CEO) decided to quit,” the veteran journalist began.


He continued: “It started simply enough. A corporate international shareholder, Actis wanted to divest from the bank and offered its 16% share portfolio to Alex Otti. Actis had very little regards for Dozie (Paschal Dozie, Founder of Diamond Bank) because their relationship had soured over the years. They had insisted on international best practices in the way the bank was managed and steadfastly refused to countenance the latter’s shenanigans. Thus, when they decided to exit the bank, they ignored him totally and instead offered the shares to Otti.
“Sources close to Otti confirmed to me that he was surprised at the offer because he was privy to the caveat in the Actis contract which stipulated that Mr. Dozie would be given ‘the right of first refusal’, in case of such an eventuality. So, he promptly informed Mr. Dozie who subsequently authorized him to prospect for any willing investor to purchase the Actis shares. Mr. Dozie had confessed that he could not muster the funds to exercise his right to buy and was ready to waive those rights if there was a buyer.
“Otti searched around and was able to locate an Anambra born Oil and Gas magnate, Dr Ernest Azudialu Obiejesi (Nestoil) and returned to Mr. Dozie with the proposal. Dozie was reportedly thrilled and met with him to facilitate the transaction. The shares were valued at $120m at N7.50/unit, against the market price of about N9. However, two days before the deal was to be signed off, after all agreements had been reached, Mr. Dozie pulled the plug. In a memorable telephone call to Otti he said, ‘Yes, Alex, on second thoughts I think you should hold action on that matter. This Actis people want to take me for granted, but I will teach them a lesson. My children and I have decided to raise money and pick up the shares.’
“Otti was flabbergasted and protested the deep embarrassment such action would cause the businessman who had worked hard to mobilise the huge resources with the attendant costs. But Mr. Dozie was unmoved. Subsequently, he (Dozie) approached GT Bank and leveraged S125m, pledging his flagship investments in MTN and created a basket of securitization which included even his personal residences. Dr Obiejesi was incensed and threatened a legal action. However, he was persuaded against it by His Royal Majesty, Igwe Nnaemeka Achebe who was the chairman of the bank at the time.”
According to Obasi, author of many books, including the latest, ‘Saved for His Praise’, a personal testimony of his battle to overcoming health challenges, Dozie, with the new shares in his kitty, was now able to fulfil his long-desired dream of installing his crown prince, his son Uzoma, as the GMD/CEO of the bank.
“Then things began to fall apart. The economy plunged, the currency lost value and the bank’s share price plummeted. It was a triple wammy. Dozie was left with the short end of the stick. Exchange rate weakened, from the N160 per dollar in 2014 when the transaction was done to about N500 when GT Bank called its loan, before settling at the present N360. The item that the Dozie’s bought shedded weight from the N7.50 they paid to an all-time low of N1 and below a few years later. The bad situation was then worsened by the inept leadership of the new management. As the rating agency Moody enumerated in a recent article, “Diamond Bank failed because of bad leadership, poor risk management, the board’s lack of independence.
“As soon as Otti left in 2014, Uzoma and Paschal purged the board, removing such principled members as Igwe Achebe, Ifueko Omoigu-Okauru (highly respected former chairman of FIRS) and Chief John Edozien (a seasoned professional and former MD of the defunct Afribank). They replaced them with palace hands who were too timid to provide the requisite checks and balances. Recall that as Actis left, it left with two non-executive directors who were also replaced by the Dozies.
“Diamond therefore embarked on a death spiral. It could no longer yield any revenues, thus putting in danger Mr. Dozie’s risky investment. He became increasingly unable to service the facility with GT Bank. It was GT Bank’s move to foreclose on Dozie’s assets to recover their money, that opened the gate to the highway which led Diamond Bank to Golgotha. Selling the institution was Mr. Dozie’s desperate move to preserve his business empire in the twilight of his career,” Obasi revealed.
- Please read details under our Banking category: “The Diamond Bank Sale and Pascal Dozie’s moral burden (3) TRAGEDY FORETOLD.”