By Blaise Udunze

The Heritage Bank’s banking license was revoked and it was ordered into liquidation on June 3, 2024. This remains one of the most controversial and widely debated events in Nigeria’s financial sector.

Heritage Bank

The lingering concerns even though official reasons have been given as regulatory breaches, inadequate capitalization and persistent financial distress, many people remain unconvinced or believe there are broader issues that deserve closer scrutiny. Surprisingly, to concerned Nigerians, this marks the first time a Nigerian bank was allowed to fail in over a decade. Despite the passage of time, one question refuses to disappear. Mind you, this is not a rhetorical question: Does the failure of a bank in Nigeria reflect only the institution’s weaknesses or should it also raise questions about the effectiveness of regulatory oversight and the influence of broader systemic or political factors?

Again, the Central Bank of Nigeria (CBN) actually may have explained that its decision to revoke Heritage Bank’s licence was based on the institution’s persistent financial weakness, its inability to meet prudential requirements and the absence of a credible path to recovery. Yes, and undisputedly, those reasons fall squarely within the regulator’s statutory mandate to protect depositors and safeguard financial system stability. Understandably, the legal basis for the action was clearly stated, even at that, the truth is that the decision has continued to provoke debate because of the broader question of regulatory consistency. If prudential weakness alone determines whether a bank survives, why have seemingly comparable institutions been treated differently?

This question deserves examination not through conspiracy theories or unsubstantiated allegations but through the lens of institutional accountability, governance and the relationship between politics and business in Nigeria.

The Heritage Bank story presents a contradiction. No doubt, one would not be wrong to say that the Nigerian banking industry is one of the most tightly regulated sectors of the economy. This is because the banks operated and still function under continuous supervision by the CBN. Also, the Nigeria Deposit Insurance Corporation (NDIC) is well known to exist primarily to protect depositors and ensure financial system stability. Routine examinations, prudential guidelines, capital adequacy monitoring, liquidity ratios, stress tests and early intervention mechanisms are designed precisely to prevent sudden institutional collapse.

Advertisement

One critical question that comes to mind is, if these safeguards function effectively, why should a licensed commercial bank deteriorate to the point of liquidation?

That question extends beyond Heritage Bank. It touches the credibility of Nigeria’s financial architecture itself.

The truth be told that no regulator anywhere in the world can guarantee that every bank will survive. This is because over time, history has shown that banks can fail due to poor corporate governance, insider abuses, weak risk management, fraud, macroeconomic shocks or prolonged insolvency. Nigeria is no exception.

However, regulators are expected to detect distress early, enforce corrective actions and minimize losses to depositors and the economy. That is the essence of prudential regulation.

Consequently, whenever a licensed bank ultimately collapses, scrutiny naturally shifts beyond management failures to regulatory effectiveness. Did supervisors identify warning signs early enough? Were intervention tools deployed in time? Were recovery options exhausted before liquidation became inevitable? Could alternative resolutions have preserved confidence while protecting depositors?

Advertisement

The Heritage Bank case naturally fuels these questions because Nigeria’s regulatory history demonstrates that liquidation is not the only available resolution mechanism. Different institutions have, at different times, received different supervisory responses.

Throughout former CBN governor Godwin Emefiele’s leadership, several banks, including Skye Bank (later Polaris Bank), Keystone Bank, Union Bank, and Heritage Bank, faced severe financial challenges but were bailed out by the central bank instead of being allowed to fail.

These banks continued operations until they were eventually sold off, with one currently distressed bank still operating despite negative shareholders’ funds.

For instance, Unity Bank was not widely regarded as financially stronger than Heritage Bank on several traditional indicators. Its 2023 audited financial statements reflected a negative capital adequacy ratio of -76.14 per cent, accumulated losses, and the external auditors drew attention to a material uncertainty regarding the bank’s ability to continue as a going concern. Despite these severe weaknesses, the regulatory response was not an immediate licence revocation. Instead, the CBN facilitated a merger with Providus Bank as a resolution strategy and approved a pivotal financial bailout package, reportedly worth N700 billion.

Likewise, First Bank of Nigeria is not left out of this trend; owing to its systemic importance and larger market presence, the institution later faced regulatory capital pressure following the withdrawal of regulatory forbearance in 2025. Another concern is that rather than withdrawing its licence, the regulator permitted the bank to remain operational under a recapitalisation programme supported through supervisory measures.

Advertisement

These examples do not necessarily suggest that the banks were identical in their financial positions, nor do they prove that Heritage Bank deserved the same outcome. Each institution presents unique circumstances, regulatory assessments and systemic implications. Nevertheless, on common ground, they raise a legitimate policy question. What specific factors determine when the regulator opts for recapitalisation, merger, restructuring or liquidation? One fact the regulators should know and take into cognizance is that greater transparency around these decisions would strengthen public confidence in the consistency and predictability of financial regulation as this remains sacrosanct.

Of course, the case of Heritage Bank’s liquidation has generated a broader conversation because of Nigeria’s history, where business fortunes have sometimes intersected with political transitions, elite rivalries and shifting centres of influence, which is more troubling.

The common truth is that across decades of experience, Nigerian businesses have occasionally found themselves flourishing under one political environment only to struggle under another. Consistently, this has always been a trend that changes in government have often altered regulatory priorities, access to public sector business and investor confidence. While correlation does not establish causation, the perception that politics influences commercial outcomes remains deeply entrenched.

This perception becomes even more significant when examining businesses that occupy strategic sectors.

Banks are strategic institutions. Telecommunications companies are strategic institutions. Energy companies are strategic institutions.

Advertisement

Government actions affecting such businesses inevitably attract public scrutiny because their operations extend far beyond shareholders to millions of citizens.

One may be moved to ask what the direct connection is. The controversy surrounding MultiChoice Nigeria offers another example of how commercial disputes can quickly assume political dimensions in public discourse. The direct connection may remain a puzzle to so many.

A thorough search revealed that over recent years, especially around the time the Heritage Bank licence was revoked, it was clear that MultiChoice faced regulatory sanctions, tax disputes, consumer protection battles, pricing controversies and legal confrontations with Nigerian authorities. Come to think of it, at different points, observers speculated that sustained pressure on the company reflected broader political or economic interests rather than purely regulatory concerns.

It is important to distinguish speculation from verified fact. Nigerian authorities consistently maintained that their actions against MultiChoice were based on compliance with tax, competition and consumer protection laws. MultiChoice similarly defended its commercial decisions through legal channels.

Well, at this point, Adewunmi Ogunsanya, a Senior Advocate of Nigeria (SAN), has direct ties to both organizations through his executive leadership and corporate board appointments. Is it a mere coincidence that his connection to both entities became a major financial focal point following the liquidation of Heritage Bank?

Advertisement

Let it be known that, despite all, the public conversation often framed the disputes as evidence of an underlying power struggle between government institutions and a dominant private enterprise, and this may remain undisputed.

Whether accurate or not, such perceptions matter because markets respond not only to facts but also to confidence. Confidence is the currency upon which banking survives.

Unlike manufacturing companies that own factories or oil firms with physical reserves, banks fundamentally operate on trust. Depositors leave their money because they believe regulators will ensure the institution remains safe.

One indisputable fact is that the moment confidence evaporates, even a fundamentally solvent bank can face severe liquidity pressure which has occurred in the past.

This is why central banks across the world routinely rescue distressed institutions, not necessarily because every management deserves saving, but because preserving confidence is often more valuable than punishing failure.

Advertisement

Nigeria demonstrated this principle during the 2009 banking crisis through recapitalisation, management changes, the establishment of AMCON and structured resolution mechanisms rather than the outright closure of several distressed institutions. That experience confirmed that regulators possess a range of tools beyond licence revocation.

The Heritage Bank case therefore naturally invites debate over why liquidation emerged as the chosen option.

Could recapitalization have remained feasible? Could acquisition have produced better outcomes? Could bridge-bank arrangements have preserved value? Could additional restructuring have protected jobs and investor confidence?

These are questions policymakers should openly address, not simply to revisit the past but to strengthen future crisis management. The implications extend beyond one institution.

Foreign investors closely observe how governments and regulators manage corporate distress. Let it be known that predictability is one of the strongest attractions for investment. When investors perceive that outcomes depend primarily on transparent rules, confidence grows.

Advertisement

When they perceive uncertainty, whether arising from inconsistent regulation, political transitions or muddy decision-making, they demand higher risk premiums or redirect capital elsewhere.

Nigeria cannot afford either perception. The country’s ambition to become Africa’s leading investment destination and to build a $1 trillion economy requires regulatory consistency that transcends political cycles.

Businesses must believe that success or failure depends principally on compliance, competitiveness and sound governance, not changing political winds.

This is equally important for regulators themselves. Institutions such as the CBN and NDIC derive legitimacy from public confidence. This is to say that absolute confidence increases when regulatory decisions are accompanied by clear, detailed and transparent explanations that address public concerns effectively, which would not give room for doubt.

Where communication gaps exist, the simple truth is that speculation inevitably fills the vacuum. And worse still, in today’s digital environment, silence often becomes fertile ground for misinformation. Transparency therefore serves not merely public relations purposes but financial stability itself.

Advertisement

The Heritage Bank episode also exposes another challenge confronting Nigeria’s economy as this can be tied to the growing fusion of politics and perception.

Even where regulatory decisions are technically justified, public trust weakens if citizens increasingly interpret every major corporate action through political lenses. That should concern policymakers.

An economy where investors suspect political motivations behind regulatory outcomes ultimately discourages entrepreneurship, weakens market confidence and slows economic growth.

The solution is not to avoid difficult regulatory decisions. Poorly managed institutions should still face appropriate sanctions. More importantly, financial discipline remains indispensable.

It must be ensured that whilst this is done, enforcement consistently demonstrates fairness, proportionality and procedural transparency. Equally, corporate leaders must recognize that sustainable institutions cannot depend on political proximity.

Advertisement

History repeatedly shows that businesses built primarily on access rather than competitiveness become vulnerable whenever political landscapes change. Strong institutions survive governments because they are anchored on sound governance rather than political patronage.

Perhaps the greatest lesson from Heritage Bank is not merely whether politics influenced events, something that remains unproven in the public domain, but whether Nigeria’s institutional framework has become sufficiently trusted that such questions no longer dominate public discourse.

That is the real challenge. A mature regulatory environment should inspire confidence that decisions arise from objective evidence rather than perceived political calculations.

Until that confidence is universally shared, every major corporate failure will continue generating political interpretations regardless of the underlying facts.

Nigeria’s economic future depends not only on stronger banks but also on stronger institutions. The CBN, NDIC and every financial regulator carry responsibilities extending beyond enforcing compliance. They must also preserve public confidence through transparency, consistency and accountability.

Advertisement

Heritage Bank should therefore become more than another chapter in Nigeria’s banking history. It should become an opportunity for honest national reflection.

Not on how to rescue failing banks indefinitely, but on how to build regulatory systems so credible, so predictable and so independent that no bank failure, however justified, will immediately trigger suspicions of hidden political battles.

For investors, depositors and ordinary Nigerians alike, that confidence may ultimately prove more valuable than any financial bailout.

Blaise, a journalist and PR professional, writes from Lagos and can be reached via: [email protected]

Advertisement