News in brief:
– The Federal High Court in Abuja has dismissed a ₦374 billion lawsuit by farmers against Keystone Bank over loan disbursement issues.
– The court ruled that the suit was incompetent because the plaintiff failed to serve a pre-action notice.
The Federal High Court in Abuja has dismissed a ₦374 billion ($240 million) lawsuit filed by the Ginger Growers, Processors, and Marketers Association of Nigeria against Keystone Bank over claims related to the Anchor Borrowers’ Programme. Justice Obiora Egwuatu ruled that the court lacked jurisdiction to hear the case, as the plaintiffs failed to serve a pre-action notice to Keystone Bank, a prerequisite under their contractual agreement.
Farmers accuse the bank of withholding funds
The lawsuit, filed on behalf of 31,309 farmers, alleged that Keystone Bank failed to disburse ₦8.6 billion out of the ₦335 billion approved loan facility, despite receiving the funds from the Central Bank of Nigeria (CBN) for onward distribution in March 2020.
The plaintiffs also sought an additional ₦30 billion in general damages, citing a breach of the banker-customer relationship. The farmers’ association, a registered cooperative, claimed it had applied for the Anchor Borrowers’ Programme and nominated Keystone Bank as its participating financial institution. They alleged that while the CBN released the loan sum to Keystone Bank with a directive to disburse it within 10 working days, the bank failed to act accordingly.
The plaintiffs further accused the bank of delaying notification of loan approval until July 29, 2020, withholding the funds for over five months, and eventually returning the money to the CBN without informing the farmers.
“The CBN released the approved loan sum of ₦8,679,289,368.92 to Keystone Bank for onward disbursement to the plaintiffs within 10 working days in March 2020,” the filing stated. They also alleged that the bank converted the funds for its use, thereby depriving them of financial support necessary for their farming operations.
Keystone Bank defends actions
Keystone Bank, through its counsel, Dr Sonny Ajala (SAN), countered the allegations, stating that the Anchor Borrowers’ Programme guidelines were merely advisory and not legally binding.
The bank argued that, as a commercial institution, it retained discretionary powers over loan disbursement. It also claimed to have offered the loan to the farmers in September 2020 but reserved the right to withhold or return the funds based on CBN directives.
Additionally, the financial institution contended that the farmers failed to issue a pre-action notice before filing the lawsuit, making their claims legally incompetent.
Court’s verdict
Justice Egwuatu upheld the bank’s argument, ruling that the plaintiffs’ failure to issue a pre-action notice rendered the suit invalid.
“It is a precondition that must be complied with. Any action commenced in breach of this requirement would be incompetent,” the judge ruled. “A court without jurisdiction cannot make further orders or take any steps beyond declaring its lack of jurisdiction. Any action taken thereafter is a nullity.”
CBN confirms fund return
The Central Bank of Nigeria, represented by Dr U.Y. Hassan, confirmed that it had released the loan amount to Keystone Bank on July 15, 2020. However, the bank later returned the funds due to non-disbursement.
“Upon receipt of this letter, the CBN, in line with its role in coordinating the programme and in accordance with its contractual obligations, accepted the repatriation of the loan sum by Keystone Bank,” Hassan stated.
With the court ruling in favour of Keystone Bank, the case against the financial institution was struck out, leaving the farmers without legal redress for their claims.
