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The Heritage Bank’s banking license was revoked, and it was ordered into liquidation on June 3, 2024.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.
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.
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.
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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?
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.