Stakeholders in the Nigerian banking sector are expressing doubts about Nova Merchant Bank’s ability to thrive following its recent transition to a full-fledged national commercial bank.

Founded by Philip Oduoza, the bank has rebranded as Nova Bank after receiving approval from its shareholders to transition from a merchant bank to a commercial bank at its 6th Annual General Meeting held in Lagos last year.


The bank’s board of directors outlined their transition strategy during the meeting, and with the backing of the Central Bank of Nigeria (CBN), Nova Bank recently unveiled its first commercial banking branch at 18 Kofo Abayomi Street, Victoria Island, Lagos.

At the opening ceremony, Chairman Phillips Oduoza emphasized Nova Bank’s commitment to excellence, stating, “We continue our tradition of excellence with our trademarked PHYGITAL experience, combining strategically located branches with seamless digital banking for personalized and innovative service.”


Lagos State Governor Babajide Sanwo-Olu also praised the bank’s progress, saying, “You have successfully steered your bank to the point where the Central Bank now deems it fit for you to transition from a wholesale bank to a retail bank.”

Despite the fanfare surrounding the branch opening and plans for additional branches in Lagos, Abuja, Port Harcourt, and Kano, stakeholders are skeptical about the bank’s ability to function effectively in its new capacity. Questions have been raised about the viability and robustness of Nova Merchant Bank even before its transition. Concerns also focus on how the bank plans to meet customer needs with only a single branch initially.

The challenging business climate in Nigeria adds to the skepticism, as better-established banks have struggled to survive. There are also doubts about Nova Bank’s ability to manage investors’ funds effectively.

These concerns have been amplified by a recent lawsuit, marked FHC/L/CP/2641/2023 and filed on December 19, 2023. The bank, through its counsel Kemi Balogun (SAN), asked the Federal High Court in Lagos to place a lien on the assets of Midwestern Oil and Gas Company Limited with the Central Securities Clearing System (CSCS) and freeze its accounts in 25 banks due to an alleged N1,648,649,286.68 debt.

In the petition, Nova Merchant Bank stated, “The respondent has become insolvent due to its inability to pay its debt in the sum of N1,648,649,286.68 owed to the petitioner. The failure of the respondent to pay the petitioner has caused great financial hardship on the petitioner.”

This scenario has led stakeholders to question the bank’s due diligence processes, as granting such a substantial loan to a defaulting company raises concerns about Nova Bank’s ability to safeguard investors’ funds, especially in its new role as a commercial bank.

“We are all aware that the banking sector is facing a reform, even more established banks are struggling to meet the new set valuation of the CBN. Everybody is doing one right issue or the other to meet up.

“Honestly speaking, I don’t think this is the right time for Nova Bank to be taking the leap they have taken. I don’t feel they are ready yet. But if the management believes that is the right thing to do, it’s just a matter of time before we know if the works or not,” Femi John, an Economist who spoke with us said.

“You are aware of what happened to Heritage Bank and how the CBN eventually got involved and shutdown the bank. It’s what is going to happen to Nova Bank eventually. The bank is not yet ready for the next level it has just taken, how solid is Nova Bank, what are their investment portfolios.

“See when people like us say these things they either say that we are an alarmist or that we are being pessimistic, but it’s the reality. In the case of Heritage Bank, we were raising the red flag for years, but the management and CBN kept assuring deposits falsely that their money was safe, it didn’t take magic for Yemi Cardoso to see what we were saying. Nova Bank is diving into a sector it is I’ll prepared for and they are not going in feet first, they are doing it head first,” Aliyu Bamanga, a financial analyst in Abuja noted.

Amidst these fears, there are endorsements of the bank’s achievements. Gabriel Ogbechie, Founder/GMD of Rainoil Limited, stated, “NOVA Bank is a bank that has rendered excellent services and supported Rainoil Limited tremendously. So we are not surprised at their growth trajectory which has culminated into what we are witnessing today.”

Looking ahead, Nova Bank’s chairman expressed optimism about the bank’s future, saying, “I am excited about the prospects of NOVA as we embark on this new growth phase. This strategic move aligns with our vision of expanding operations and diversifying services while providing exceptional services to our valued customers. The Management of the Bank has firmly established a remarkable legacy of growth since its inception and has consistently demonstrated its ability to achieve substantial progress across various parameters. The commercial banking license will strengthen the Bank’s revenue base, entrench value creation, impact earnings growth, and sustain higher returns for the shareholders while affording more banking customers across the nation the opportunity to enjoy the products and services of NOVA Bank.”

Source: The Octopus News