The Mystery of First HoldCo's New Owner: Implications for Nigerian Banking and Investment Strategy

The acquisition of a 25% stake in First HoldCo by Femi Otedola in July 2025 has sent ripples through Nigeria's financial sector, marking a pivotal moment in the long and often turbulent history of the country's oldest banking group. Otedola, a billionaire industrialist and chairman of the holding company, has positioned himself as the architect of First Bank's revival, promising a return to corporate governance, operational discipline, and global competitiveness. Yet, the opacity surrounding the ownership shift—coupled with regulatory pressures and structural vulnerabilities—raises critical questions about the risks and opportunities for investors, regulators, and the broader market.

A New Era of Ownership, But at What Cost?

Otedola's block deal, valued at N323.33 billion for 10.43 billion shares, is more than a financial transaction; it is a power play. By consolidating control from the outgoing Oba Otudeko, Otedola has effectively erased the legacy of a decades-old governance struggle. His vision for First Bank is ambitious: a modern institution with aggressive digital expansion, expanded lending, and a global footprint. The share price's 20% surge in two trading sessions post-transaction suggests market optimism, but this confidence must be tempered by scrutiny of the challenges ahead.

The Central Bank of Nigeria (CBN) has already signaled its hand in this drama. The revised Single Obligor Limit policy, introduced in June 2025, compels banks to reduce exposure to large borrowers—a move that directly impacts First HoldCo's oil and gas-heavy portfolio. Otedola's restructuring, including the creation of a Special Purpose Vehicle (SPV) to manage shareholder infighting, appears designed to align with these regulatory expectations. Yet, the absence of a formal disclosure to the Nigerian Exchange Limited (NGX) for such a massive transaction—despite mandatory requirements—casts a shadow over transparency.

Strategic Risks and Governance Gaps

First HoldCo's capital adequacy ratio remains a concern, hovering just above the regulatory minimum. The CBN's suspension of dividends for banks under forbearance, including First HoldCo, further constrains its ability to reward shareholders. Meanwhile, non-interest income has plummeted, contributing to a 17.9% year-on-year decline in Q1 2025 profits. Otedola's pledge to invest an additional N320 billion in cash, without leverage, is a bold statement of confidence. But even the most well-intentioned strategies falter when structural weaknesses persist.

The regulatory scrutiny extends beyond capital ratios. The SPV's role as an overseer, approved by the CBN and the Office of the Attorney General, is a nod to the need for governance reform. Yet, minority shareholders remain wary. The NGX's rules demand transparency for transactions exceeding 5% of shares, and the July block deal's lack of disclosure has fueled speculation about whether the process was truly equitable.

Investor Confidence: A Fragile Balancing Act

For investors, the stakes are high. Otedola's track record in revitalizing conglomerates like Dangote Group offers hope, but the Nigerian financial sector is a different beast. The success of his turnaround strategy hinges on three pillars:
1. Digital Transformation: First Bank's digital infrastructure must evolve to compete with fintech disruptors and global peers.
2. Diversification: Reducing reliance on the oil and gas sector, which has historically left the bank vulnerable to commodity price swings.
3. Regulatory Compliance: Navigating the CBN's tightening rules while maintaining profitability.

The CBN's emphasis on protecting minority shareholders is a positive step, but enforcement remains inconsistent. Investors must weigh Otedola's long-term vision against the immediate risks of governance gaps and regulatory friction. The NGX's delayed filings also highlight the need for stronger oversight mechanisms to prevent opacity from eroding trust.

A Path Forward: Caution and Opportunity

The mystery of First HoldCo's new owner is, in many ways, a microcosm of Nigeria's financial sector. Otedola's acquisition represents a calculated bet on stability and growth, but the path is fraught with challenges. For investors, the key lies in balancing optimism with caution. Here's how to approach the opportunity:
- Short-Term Caution: Avoid overexposure until the NGX's disclosure requirements are met and the SPV's governance role is fully transparent.
- Long-Term Potential: Monitor Otedola's capital-raising efforts and digital expansion plans. A successful turnaround could yield outsized returns, particularly if the CBN's regulatory environment stabilizes.
- Diversification: Consider pairing First HoldCo with more diversified Nigerian equities to mitigate sector-specific risks.

The Nigerian financial sector is at a crossroads. Otedola's leadership could catalyze a new era of professionalism, but only if he addresses the structural vulnerabilities that have long plagued First Bank. For now, the market watches—and waits—for the next move in this high-stakes game.