Nigerian Economic and Financial Crimes Commission (EFCC) Chair Farida Waziri threatened to arrest debtors given questionable loans from five major banks in the oil-producing West African state. The government sacked five bank CEOs on August 14, 2009.
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Central Bank and the bubble in the banks
Nigerian Guardian Editorial
MR. Lamido Sanusi, Governor of the Central Bank of Nigeria (CBN) last Friday made a breath-taking presentation on the state of some banks' operations and provided to the Nigerian people the sordid details of some part of the banking system. Five prominent banks were declared technically insolvent, chronically illiquid, with the revelation that they had largely eroded their shareholders' funds and practically breached all the ratios in banking. In effect they could no longer be allowed, without intervention, to have their doors open to the public.
The CBN's intervention is a devastating response to management recklessness, accounting opaqueness, concealment howsoever so defined and an attempt to reassure depositors with a bailout to avoid a systemic failure.
The course that ran unto the Friday massacre was known to have been in the making before the banking consolidation announced in 2004. It is well argued that the consolidation exercise overtly allowed the evil day to be postponed. This being that the garnering of so much money in private placements and the public offerings added to shore up Tier one capital in the banks, enabled free unencumbered flows as well as bubble funds to alter and mask the actual state of the banks' books. The post-consolidation period afforded some banks' management an opportunity to literally play around with the dubious but huge cache of shareholder funds.
There is a sense of de javu as the disclosures tumble out that the cumulative erosion of share capital in the affected institutions - Afribank, Intercontinental Bank, Oceanic Bank, Union Bank and Finbank - exceeds financial analysts' pessimistic estimates. The banks require about N205 billion to meet the minimum benchmark of 10 per cent capital adequacy. This is an astounding revelation considering that these banks combined, recently reported almost N800 billion in shareholder funds.
The banks also had about half a trillion Naira lent to the stock market. There are reports that this is a play with mirrors: a large portfolio of privileged borrowers buy up the shares of the same lenders in a mockery of margin trading, with the loan asset and collateral predicated on the same risks and whims of dispirited stock prices. Additional to this balance are internal insider trading accounts for yet another stock margin mismatch.
Approximately another half a trillion Naira was extended to the oil and gas sector. We need to put these loans in perspective. The so-called "oil and gas" sector is a euphemism for the booming trade of a handful of middlemen in the retail sale of imported petroleum products by the world's sixth largest producer of crude oil.
Every tanker that berthed was literally sailing on the credit facility of Nigerian banks that were inordinate in their assessment of the so-called traders and the inherent risks of worldwide pricing and exchange risk in the specialist petroleum market. It is not much consolation to anyone that this troubled business opportunity is a direct throwback to the incompetence of both public policy and public finance in Nigeria's energy requirement. The loans are, in the main, adjudged to be doubtful for recovery.
Mr. Sanusi revealed that non-performing loans totalled N1.14 billion out of a loan book of N2.8 billion and individually ranged from 18 to 48 per cent of total loan. Effectively, these indicators suggest convincingly that insolvency has overtaken illiquidity in these institutions because an orthodox bank is to earn income for operations and profit sharing from its loan assets. In the massively constricted earning assets base, these were no longer viable banking institutions. Mr. Sanusi confirmed that they had far fewer assets and a lot more toxicity. The CBN is thus injecting N420 billion to stem depositors run and contain systemic collapse of the banks in the public interest.
But what are the sources of this N420 billion from the public treasury and would the CBN Governor publish the terms of extending them to publicly listed companies and make this clear to existing shareholders? In the event, the new proprietary rights of the public treasury in these five institutions must be carefully amplified as this is not quite a short term measure in the Nigerian environment.
In all, this could be another unfortunate manifestation of Nigeria's economic dysfunction and suboptimal management of scarce resources. This situation is not just about numbers, management, judgement or lack of it, loan provisions and prudential guidelines. Money was being lent to fund avoidable imports of crude oil refinements and to stoke up a stock market in the absence of fundamental factors for growth authorised by less than warm corporate governance rules.
These are incredible developments: it has taken the arrival of the new Central Bank Governor for what appears to be an overdue stocktaking of asset quality in the sector to commence in earnest. No example of proven infraction by several bank directors has been so punished in one fell swoop under our extant laws as was brought into being last Friday. It does not tally with the mob application of the Failed Banks decree of the 1990s when the banks were already comatose and the politicking of the whole process was sour.
In the 60 odd days since his appointment to the office, Mr. Sanusi has guided the public towards a higher institutional resolve for full disclosures and transparency in the banking sector and his priority role of sanitising all the books. We are appalled by the illustration of the CBN that either its capacity for supervision was impaired until now or that it is only a change of leadership that has made these phenomenal discoveries possible. The bank must share the blame for this debacle, search itself and answer to the Nigerian people about the avoidable loss of resources in this episode under its watch.
Nonetheless, the issues being raised by these disclosures - governance, recovery of loans, recapitalization of banks and negligence by regulators need not be unduly politicised. The sensitivities of all the parties - borrowers, lenders, regulators and shareholders need to be handled expeditiously and transparently. To allow a rigmarole would pose further danger to the banking sector.
We are equally persuaded that there are questions for the regulators and supervisory agencies that are empowered by our laws to take hold of the banks' books and issue an opinion to the public. The current situation illustrates the effete efforts of the past years, that they have not done their duties proficiently. It is also tragic to observe that various ratings and laudatory awards that have been won by the banks from home and abroad now seem to be fraudulent representations. We call for sanctions and punishment for those who have earned it through their disservice and dereliction of duty both in the commercial banks and CBN. The reverberations are just as disturbing and humiliating to a once-hallowed profession.
Banks, in their normal course of business obtain deposits from the general public and through another window, disburse these funds to eligible borrowers in the belief of a commensurate return that assures of the principal and interest sums. There has been eerie silence in Nigeria at large and in banking halls since the official revelation of the worthless status of the loans extended. The multiplier effects of the current disclosures and the imminent announcements from other banks' books portend further dislocation of credit to all strands of the economy. They point to an enforced domestic contraction for a badly repressed Nigeria in a recession originally said to be induced by external economies.
We believe that the procedures now begun should run their full course with the regulatory, supervisory and law enforcement authorities and contain the hypocrisy of the work in the financial sector. The implications of non-conclusion of these initiatives are horrendous. Mr. Sanusi pointedly told the nation that the process is far from over as many more banks' books are still under examination. Nigerians await his findings. Due process and fair hearing must however be adhered to.
Sanusi has continually said that the CBN and government will not allow any bank to fail . We hold him by this promise. But he must refrain from passing judgement on the guilt or otherwise of the affected persons. That is a judicial function. The interest of depositors must also be a priority in whatever framework is adopted for solving this problem - that we strongly counsel.
Sanusi and the CBN must seize the moment going the whole hog for full disclosures and loan-loss provisioning. We hope useful lessons are already being learnt by stakeholders in the banking industry, particularly about the need for greater emphasis on ethics and professionalism. A bank is healthy not in the count of its marbled floors and chauffeured cars but in the soundness of its loans and additionally, the speed with which it may convert its risky assets to less risky cash in addition to the integrity of its managers and directors.
Bank Debtors Get 7-Day Ultimatum
N37bn Debt: SEC queries Okereke-Onyiuke
Nigeria ThisDay
By Davidson Iriekpen, Akinwale Akintunde, Goddy Egene and Eromosele Abiodun, 08.20.2009
Debtors owing the five troubled banks whose chief executives were axed last Friday by the Central Bank of Nigeria (CBN) seem to have no breathing space any longer.
The Economic and Financial Crimes Commission (EFCC) yesterday handed over a seven-day ultimatum to them to pay their debts or face arrest, prosecution and possible seizure of their assets.
Yesterday, CBN unfolded the list of debtors comprising companies and their directors who secured loans worth N747 billion from the affected banks.
On the list of directors of such companies are prominent businessmen, top bankers, politicians and other important dignitaries.
EFCC Chairman Farida Waziri told journalists that the anti-graft agency opted to go tough on the debtors because of the urgent need to salvage the financial sector from total collapse and restore discipline to the sector.
The commission appears to have been imbued with powers to do so under Section 42 of the Economic and Financial Crimes Commission (Esta-blishment Act, 2004).
The section states that, “Any offence committed or proceedings instituted before the commencement of this Act under the provisions of the- (a) Miscellaneous Offences Act; (b) the Banks and Other Financial Institutions Act 1991 as amended; (c) Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act, as amended; (d) the Advance Fee Fraud and Other Related Offences Act; (e) the Money Laundering Act, and; (f) any other law or regulation relating to Economic and Financial Crimes, shall as the case may require be enforced or continue to be enforced by EFCC established under this Act.”
Waziri said if the individuals and companies involved continue to default in payment, her agency would be left with no alternative than to prosecute them immediately.
She was guest speaker at a forum organised by Lawyers in the Media (LIM) at the ongoing annual general conference of the Nigerian Bar Association (NBA) in Lagos.
The EFCC boss said the opportunity of repayment of the loans within the stipulated date was to enable those involved in the bank borrowings to either pay through bank drafts or cheques in the name of the Federal Government.
Waziri said: “What we are doing with the case of the sacked bank executives should be a strong signal to all the debtors no matter who they are that we mean serious business on the recovery of these funds. We have been doing it quietly before now because we already made some recoveries but now it is time to go full blown with them. No one is above the law and our law is no respecter of persons.”
She said it was in the interest of the debtors to comply with the directive rather than wait for arrest and prosecution.
“I will advise the debtors whose names had already been published by the Central Bank to take advantage of this ultimatum by issuing their cheques and drafts in the name of EFCC for proper and coordinated recovery after which we restitute by returning the funds to the appropriate banks,” Waziri said.
A breakdown of the loans, which are classified as non-performing, is as follows: Oceanic Bank Plc, N278.204 billion or 37 per cent; Intercontinental Bank Plc, N210 .903 billion or 28 per cent; Afribank Nigeria Plc, N141.856 billion or 19 per cent; Union Bank of Nigeria Plc, N73.582 billion or 9.8 per cent; and FinBank Plc, N42.445 billion or 5.6 per cent.
The two biggest debtors to Intercontinental Bank are Ascot Offshore Nigeria Limited through which Henry Imasekha along with three others secured N44.67 billion and Rockson Engineering Limited through which Engineer J.1. Arumemi-Ikhide and his wife secured N36.989 billion.
Oceanic Bank on the other hand, has Notore Chemical Industries Limited, which borrowed N32.392 billion and Rahamaniyya Global Resources through which Abdul Rahaman Musa Bashir got N28.598 billion.
The two principal debtors to Union Bank are Transnational Corp Plc, in which the Director-General of the Nigerian Stock Exchange (NSE), Dr. Ndi Okereke-Onyiuke, is a director/ major shareholder, which borrowed N30.863 billion on behalf of the company and MTS First Wireless Limited through which Chief Lulu Briggs secured N9.849 billion.
Afribank has Kolvey Company Limited, which borrowed N16.5 billion and Rehoboth Assets Limited through which five of the Ajaegbu families got N28.598 billion.
The two key debtors to FinBank are Aquitane Oil and Gas which borrowed N3.656 billion and Falcon Securities through which it’s Managing Director, Peter Ololo, who is currently cooling off with the EFCC in Abuja secured N3.49 billion.
The Lawyers in the Media’s programme, with the theme “Crusade Asgainst Corruption and Effects of Trial by Media,” was one of the sessions held yesterday as part of the activities lined up by the NBA for the five-day conference.
Speaking earlier in her presentation, the EFCC boss solicited the support of the media, the Bar, the Bench and the general public in the fight against corruption in Nigeria.
She said: “Every stakeholder has a role to play within the ambit of the rule of law, due process and the constitution. It is important to note that no matter how effective and efficient any of these bodies may be in the crusade against corruption, it would not amount to much if there is no simultaneous complimentary effort by other bodies.”
Referring to the role of the Bench in the fight against corruption, Waziri said: “In adjudicating over cases, the judge must act as an impartial umpire and should not give the impression that he wants a particular person punished by all means.”
She said lawyers should also not expect to constitute a clog in the wheel of justice, adding that they (lawyers) had in recent times “thrown overboard the laudable and distinguishing ethics of the legal profession. It is now a shameless act for many defence counsel to exploit and abuse the judicial process to stall prosecution of cases by frivolous and endless interlocutory applications and appeals. Some engage in blackmails and intimidation of judges and all kinds of schemes which delay and frustrate trials”.
The EFCC chairman also admonished the media while carrying out their constitutional duty to not “usurp the role of the court by carrying out trial and reaching conclusion on the guilt or otherwise of persons who are accused of having committed any offence related to corruption or any other crimes on the pages of newspapers or electronics media”.
She added that inasmuch as the public should be informed of alleged corrupt activities of its public officers, the media should to do so within the confines of the rule of law.
Waziri said most times, the report in the media of those undergoing trial prejudices the minds of the public and make them hold the court in contempt and dishonour, “especially where it ultimately reaches conflicting or different verdict”.
The Lead Speaker, Prof. Peter K. Fogam of the Faculty of Law, University of Lagos (UNILAG), said inasmuch as the media have a constitutional right of expression, “they should also direct some efforts to protect the rights of an accused to a fair trial. The media must be careful about the very important right of those who are being accused of corruption, which the media are fighting”.
Others who discussed the topic included Prof. Ralph Akinfeleye of the Department of Mass Communication, UNILAG; Legal Adviser and Member of the Editorial Board of The Guardian Newspapers, Mr. Kingsley Osadolor, and the Executive Director, Centre for Free Speech, Lagos, Mr. Richard Akinnola.
Meanwhile the Board of the Securities and Exchange Commission (SEC) yesterday gave a seven-day ultimatum to the Director-General of the Nigerian Stock Exchange (NSE), Prof. Ndi Okereke-Onyiuke, to explain the circumstances under which Transcorp Plc, which she chairs, appeared on the list of “non-performing” debtors of the five banks whose executive managements were removed by the CBN last Friday.
As a follow-up to the removal of the executives, the undercapitalised banks whose loans had not been performing, the CBN yesterday published the names of debtors who owe a total of N747 billion.
Transcorp, which Okereke-Onyiuke chairs, was said to owe Union Bank of Nigeria Plc N30.9 billion and Interconti-nental Bank Plc N6.5 billion.
A statement by SEC’s Head of Media, Mr. Lanre Oloyi, said that in furtherance of its mandate of ensuring the integrity of the market, the commission had requested the NSE DG to explain the circumstances that warranted Transcorp to owe the said sum.
He said that the decision to query Okereke-Onyiuke was arrived at by the commission at its 43rd meeting held in Abuja yesterday.
“Furthermore, in order to protect the integrity of the capital market, the commission has also directed the immediate suspension of any of the affected executives of the five banks who are members of the council of the NSE pending the conclusion of investigation of allegations against them by the CBN,” SEC said.
The board of the apex regulator of the capital market commended CBN’s action aimed at sanitising the banking system and mandated its commission’s management to intensify surveillance of the market and its operators.
In order to give the new management of the affected banks time to settle down and appropriately brief the market, the commission confirmed that it had directed the NSE to place the securities of the said banks on full suspension for a period of two weeks, which had already been implemented last Monday.
“The commission has also directed that henceforth no securities of a public quoted company should be placed on technical or any other form of suspension without the prior approval of the commission. Apart from the five banks whose suspension was recently approved by the commission, the NSE has been directed to forward to the commission, the list of all quoted companies currently on technical suspension, for its review,” SEC said.
When contacted, NSE spokesman, Mr. Sola Oni, said the exchange was yet to receive any formal letter from SEC on the issue. He said: “It is unfortunate to be hearing this kind of sensitive information from the media.”
However, in an earlier interview with THISDAY, Oni had explained that Okereke-Onyiuke was not indebted to any bank in her individual capacity.
He said that the N30.9 billion owed Union Bank was part of the loan taken by Transcorp to purchase 51 per cent stake in Nigerian Telecommunications Limited (NITEL).
He said: “The loan was a business transaction between Transcorp and Union Bank. As you can remember, it was taken to finance the acquisition of a stake in NITEL. Part of the loan was paid from the money realised from the Initial Public Offering (IPO) by Transcorp. However, interest charges have made the loan to rise to the current level.
However, Transcorp intends to use the proceeds expected from the divestment from NITEL to repay the loan. I think the Federal Government through the Bureau of Public Enterprise (BPE) is looking for a core investor to buy that stake and once that is done, Transcorp will be able to liquidate the loan. Besides, Okereke-Onyiuke is just one of the directors of the company.”
Transcorp has been experiencing strings of challenges since it bought into NITEL. Before the government revoked its sale, Transcorp was said to be using profit from some of its other businesses to fund the operations of NITEL. The development necessitated shareholders of Transcorp to authorise the directors to divest its stake in the telecommunications outfit and concentrate on other businesses.
The share price of Transcorp has suffered severe bashing at the stock market and is currently trading at par value of N0.50 per share.
Dangote, Oando, Rockson Dispute CBN Claim
Apex bank admits errors
By Ejiofor Alike in Lagos and Kunle Aderinokun in Abuja, 08.20.2009
Nigeria ThisDay
The managements of Dangote Industries Limited, Oando Plc, Rockson Engineering Limited and Global Fleet Oil and Gas Ltd. have disputed yesterday’s “non-performing” debtors’ list published by the Central Bank of Nigeria (CBN).
The CBN had last Friday removed chief executive officers and directors of Intercontinental Bank Plc, Oceanic Bank Plc, Afribank Plc, FinBank Plc and Union Bank Plc and replaced them with interim CEOs. The CBN cited the unacceptable levels of loans owed to these banks among other factors for the ouster of the bank bosses.
It also published yesterday the list of the big debtors to the banks to compel them to clear the indebtedness without further delay, failing which, it said the banks would take all appropriate legal actions to ensure repayment.
The said advertorial among others, had listed Alhaji Aliko Dangote as a director and shareholder of Dansa Oil and Gas Limited, and the above stated firms as some of the defaulting customers to Intercontinental Bank Plc.
But the banking watchdog in a statement posted on its website, said the list published yesterday was compiled from reports from the affected banks as at May 31, 2009, which was a cut-off date for the special examination in the first 10 banks. The apex bank said it was probable that the situation could have changed if certain individuals or organisations had effected fresh payments on their facilities.
It noted claims by some individuals on the published list of debtors/defaulters that the figures posted against them were not correct and threatened to go to court. The CBN also acknowledged some typographical errors regarding the titles of some government officials and some companies “and wish to comment as follows: “The general public and all concerned should note that the list published is as at 31st May, 2009 and if any of the defaulters/debtors have made any repayments after that date, they should sort it out with the relevant bank; the title “Accountant General” under Intercontinental Bank Plc list, should have read “Accountant General of Zamfara State”, while the name “Delta State Government” under the Oceanic Bank list, should have read “Delta Steel Company”.
Consequently, the CBN said it regrets “any inconvenience caused as a result of the typographical errors mentioned.”
It nonetheless, said the list of other debtors/defaulters was being compiled and would be published on an ongoing basis.
However, in a statement made available to THISDAY, the management Dangote Industries insisted that Dandote was neither a director nor a shareholder of Dansa Oil and Gas Limited.
According to the statement, “We wish to state for the records that Alhaji Aliko Dangote is neither a Director nor a Shareholder of Dansa Oil and Gas Limited as averred. This is verifiable through the company registration documents held by the Corporate Affairs Commission (CAC) wherein directors of the said company are listed as Alhaji Sani Dangote, Alhaji Mohammed Dangote and Ali Dangote.”
The statement noted that Aliko Dangote is not the same as Ali Dangote “as erroneously published in the CBN advertorial.” Ali Dangote, the statement said, is the son of Alhaji Sani Dangote.
“Form CAC7 of the Corporate Affairs Commission shows Ali Dangote’s signature, which is very different from Alhaji Aliko Dangote’s signature. Furthermore, Alhaji Aliko Dangote has no part in the management and running of Dansa Oil and Gas Limited.
“A letter has been written to the Central Bank of Nigeria to correct this misrepresentation and to request the removal of the name of Alhaji Aliko Dangote from the list of non-performing debtors of Intercontinental Bank Plc.”
Concerning Dangote Industries Limited’s indebtedness to Oceanic Bank Plc to the tune of N2,526,460,000.00, the statement said: “We are in dispute over the charges and are very close to resolution.
“A company of our size will take on facilities from bankers and financiers in the course of our business. As a responsible organisation, we deliver to our obligations in servicing these loans. It is on record that our credit rating remains admirable and our bankers have confidence in our ability to meet our obligations.”
In a related development, the Group Managing Director of Global Fleet, Mr. Jimoh Ibrahim, in a statement yesterday said he and four companies in which he has interests namely - Global Fleet Oil and Gas Ltd., Global Fleet Industries, Fleet Hotels and NICON Group - owe Oceanic Bank Plc N8 billion and not N14.7 billion.
Also, Oando in a rejoinder to the CBN advertorial stated that there was no way its relationship with Oceanic Bank could be deemed non-performing.
The advertorial had stated that Oando had total non-performing loan facility of N7.1 billion with Oceanic Bank Plc and constitutes one of the big debtors in the bank.
In a statement signed by the management of the company, Oando stated that as part of its ongoing relationship with Oceanic Bank, it had different credit balances on its deposit account and other debit balances on its advised loans as at May 31, 2009, adding that none of the debit balances represented “a past due obligation”.
For instance, it stated that in the Oando Plc current and deposit account, it had a balance as at May 13, 2009 of N2.1 billion.
Oando demanded from CBN and Oceanic Bank to correct the erroneous impression in the report, adding that it is a responsible entity and committed to proper financial management practices.
Ibrahim said a letter written to him on May 18, 2009 by Oceanic Bank and titled “Re: Outstanding Indebtedness” put the total outstanding on the facilities of Global Fleet Oil & Gas Ltd., Global Fleet Industries, Fleet Hotels, NICON Group and Barr. Jimoh Ibrahim at N8 billion.
The letter jointly signed by Robinson Ofomata (Asst. GM, Corporate Banking) and Oti Ikomi (Executive Director, Corporate Banking Group) acknowledged the receipt of N3 billion to date on the outstanding of Ibrahim’s facilities with the bank.
“Subject to getting value for the N1,000,000,000.00 cheque payment…May 18, 2009, the total outstanding on your facilities will now be N8,000,000,000.00 (eight billion naira only),” the bank said, adding “we…look forward to a most mutually beneficial relationship even as it is our hope that other payments necessary to fully extinguish these facilities will follow soon.”
He said the CBN acted hastily and that in the light of its (CBN’s) allegations of inaccuracy and non-disclosure against the banks, should “have found time to get the current figure”.
Also, the Managing Director, Rockson Engineering Limited, Sir Arumemi Johnson- Ikhide, and its Chairman, Senator Aniette Okon, also described as false the publication by the CBN that their company’s indebtedness to Intercontinental Bank stood at N36, 989,685,692.84.
They insisted that the company’s indebtedness to the bank was N14, 423,291,589. 49. Okon said the company would write to the CBN for the retraction of the publication.
The Rockson Engineering executives said the National Integrated Power Project (NIPP) might suffer a major setback as foreign manufacturers involved in the execution of major power projects under the NIPP had suspended the supply of equipment for the ongoing projects.
Rockson Engineering Company Limited is the contractor handling four of the nine ongoing power projects under the NIPP.
Specifically, they said all the foreign firms involved in the manufacturing of the equipment for the projects had suspended actions over fears that some Nigerian banks are distressed.
“The foreign manufacturers have said that they will no longer supply equipment for the projects and it will affect their completion dates. They are holding Letters of Credit (LCs) from the banks the CBN pronounced as distressed. No bank will fund government projects anymore; if you present CBN Letters of Credit, they will not honour it. The initial setback of the NIPP was the power probe by the House of Representatives. Today, the issue is on the integrity of the LCs issued by the CBN.
It is based on the LCs that we obtained facilities from the banks. If the CBN is saying that the loans are non-performing, it means that their LCs are not credible,” said Okon.
Some of the projects to be executed by Rockson Engineering include the 1074 megawatts capacity Ala-Oji Power Station, the largest station under the NIPP, being built in Ugwunagbo Local Government Area of Abia State and the Gbarain Ubie power station in Bayelsa State.
Others include the Egbema Power Plant in Imo State and the Omoku Power Station in Rivers State.
Fresh questions on the credibility of ailing banks’ external auditors
Wednesday, 19 August 2009 01:05
IHEANYI NWACHUKWU
Nigeria Business Day
Shortly before the Central Bank of Nigeria’s axe fell on the five managing directors of the ailing banks, their external auditors were campaigning on their behalf over the proposed implementation of the International Financial Reporting Standard (IFRS), thereby misinforming the public that all was well.
Not a few financial experts believed that if there were absolute transparency in financial reporting, we would doubtless have seen major insolvencies in a number of industries, particularly the banking industry. Is it right to say that regulators were in dilemma whether to act against the banks and perhaps precipitate their collapse with widely damaging effects, or whether to continue with the status quo, that would likely result in a worse failure at a later date as being experienced now? These could have motivated CBN’s governor, Sanusi Lamido Sanusi’s action on the five ailing banks.
With the well known collapse also of the US energy giant, Enron, Worldcom, etc and its multiplier effects, the accounting and auditing profession also came under sharp scrutiny by a disturbed and bewildered public and with that other extraneous factors that, hitherto, have no fundamental on management performance came under high beam; questioning the accountant’s competence and integrity, apart from raising doubts on the extant standards of corporate governance.
The question still awaiting answers remain that some auditors approved these banks’ financials which were presented to shareholders at the annual general meetings, refusing to disclose their debt portfolio. What a misinformation?
For instance, an audit firm in Nigeria with international reputation had audited and approved the consolidated financial statement of one of the five ailing banks and its subsidiaries, stating that the preparation and fair presentation of the financial statements is in accordance with Nigerian Statement of Accounting Standards (SAS) and with the requirements of the Companies and Allied Matters Act 1990 and the Banker and Other Financial Institutions Act 1991. How one wished the Nigerian Accounting Standards Board was aware of this. CBN’s findings on these five banks raise questions on most auditors’ credibility especially on disclosures of debt exposures.
For every going concern, especially those public limited companies, accounting for sustainability involves recognising the hidden (or intangible) costs and benefits of decisions as well as the tangible: seeing now how the decisions taken today will affect future performance and outcomes.
The auditors had told the bank’s shareholders that “we have audited the accompanying consolidated financial statements of “the Bank” and its subsidiaries (together “the Group”) which comprises the consolidated cash balance sheet as at 31 December, 2008 and the consolidated profit and loss account and consolidated cash flow statements for the period then ended and a statement of significant accounting policies and other explanatory notes.
In our opinion, the financial statement gives a true and fair view of the state of the financial affairs of the banks and group as at 31 December, 2008 and of their profits and cash flows for the period then ended in accordance with the Nigerian Statement of Accounting Standards, the Companies and Allied Matters Act 1990 and the Banks and Other Financial Institutions Act 1991.”
Accounting information about a business entity or enterprise is required by a variety of users. This needs dictate the fundamental objectives of accounting and the model of reporting information. Firms, organisations or enterprises carry on business activities in a given economic, social and political environment and there is public interest in their operations.
For instance, individuals, financial institutions or group of investors need accounting information to determine the liquidity, profitability and viability of the enterprise. Managers in an enterprise need accounting information to measure performance, plan and control operations. Employees and customers of an enterprise need accounting information in order to assess the ability of the enterprise to produce goods or to render services on a continuous basis.
Governments and regulatory bodies need accounting information in order to be able to impose and collect taxes, to regulate certain business activities and to plan, execute and evaluate government projects. Quasi-government establishments need accounting information in order to meet their statutory obligations.
Before this bank mess, the increasing misinformation on financials of public quoted companies by accountants, auditors has continued to put local and international investors in a fix and allowing them to sit on gun powder awaiting explosion.
Disclosure of information relating to financial implications of inter-company transfers and technical/management agreements between a subsidiary/associated company and its immediate and/or ultimate parent/related company usually provided additional insight into the understanding of financial statements. For instance, a Nigerian Accounting Standard takes the view that disclosure which goes beyond minimum legal requirements is useful for a more meaningful understanding of financial statements.
The importance of well audited financial reports cannot be overemphasised because the recent reporting of financial information on the internet which is fast becoming common goes a long way to explain how important it is to investors. It gives investors from any country ready access to the financial information of companies, regardless of their country of domicile.
Auditors need to understand that information expected to be provided in financial statements are those that are quantitative and qualitative in nature to aid their users in making informed economic decisions. There is no doubt saying that financial statements are therefore expected to be simple, clear and easy to understand by all users.
Financial statements are the means of communicating to interested parties information on the resources, obligations and performances of the reporting entity or enterprise. Meaningful information can be gathered, collated and presented in different forms. At present, the information disclosed by some enterprises is limited to the minimum legal requirements.
While other enterprises disclose additional information such as source and application of funds statements and value added statements, little information is provided in respect of related company’s transactions.
Business failures were initially blamed on management; it is now perceived that auditors contribute to the mess. For instance, this led the British Institute of Management to request for a standard on operational audit in the early 1980’s.
Operational audit was expected to be a systematic, comprehensive, critical and constructive examination and appraisal of organisational structure and management practices. This is what has today metamorphosed into corporate governance.
The Nigerian Accounting Standards Board (NASB) hitherto, had a version of response to these casts. It had in existence an extensive due process in the development of its standards. This process was considered essential to ensure that all parties are given ample opportunity to express their thoughts, practice, dreams, and views so as to ensure that the standards, practices and guidelines so developed, are relevant, consistent and logically derived. The board has always been directed by a governing council drawn from organisations having operational interest in financial reporting.
Apart from the fact that Section 335(1) of the Companies and Allied Matters Act, 1990 requires that all financial statements issued in Nigeria must comply with the standard laid down in the Statements of Accounting Standards issued from time to time by the Nigerian Accounting Standards Board, one can point to some measures of persuasion that were evident.
This include independent auditors, who besides taking it as a professional responsibility to ensure that accounting standards are applied properly by management were also required by the Institute of Chartered Accountants of Nigeria (ICAN) to ensure compliance and to also so indicate in their report.
Likewise, the provision of Section 26(2) of the Banks and Other Financial Institutions Act (No.25) of 1991 requires the financial statements of banks to comply with all applicable accounting standards. The Central Bank of Nigeria also requires auditors’ report of banks to state categorically that the accounts have been prepared in compliance with relevant Statements of Accounting Standards.
The fact that relevant enabling laws that set up the organisations and entities mentioned earlier only required them to exercise authority over varying aspects of monitoring of compliance to Statements of Accounting Standards, without clearly vesting the power on any one entity made the situation very cloudy.
It is unsurprising that in the midst of confusion, compliance monitoring was not satisfactorily done and worst still, none of these organisations/agencies was clearly vested with the responsibility for the damages that may have ensued.
The promulgation of the NASB Act, 2003 and the setting up therein of the NASB Inspectorate Unit came as a better version of an evolutionary approach by government to strengthen compliance to accounting standards and enhance reliance.
The second term of the immediate past administration brought with it major reforms aimed at promoting confidence in corporate reporting and governance, public sector procurement, revenue administration, accelerated liberalisation and deregulation of the petroleum sector, governance and institutional strengthening, inter-governmental relations, financial management and accountability (financial management, external audit, financial reporting practices and capacity building in the budget offices), civil services administration reforms.
The pursuit of these reform mandates gave rise to such measures, in government, as the fashioning of the Fiscal Responsibility Bill, implementation of the new oil and gas unit, parastatals’ support unit, the setting up of Economic and Financial Crimes Commission (EFCC), the Independent and Corrupt Practices Commission (ICPC), and the Nigerian Extractive Industries Transparency Initiative (NEITI).
In the midst of these developments, it became important that the government needed to engage in wide-ranging reviews, which recognises the importance of reassuring the markets and the public at large, that corporate reporting and governance frameworks in Nigeria were sufficiently robust.
It would be recalled that on May 17, 2007, the National Assembly passed the bill for the enactment of a unified independent regulator to be given the central role of delivering a package of reforms to raise the standards of corporate governance, strengthen the accounting and audit profession, valuation and actuarial practices and provide an independent system of regulation for those professions.
Regrettably, it was not signed into law before the present administration assumed office. It is worthy to note that the current administration has sent the bill again to the National Assembly for accelerated hearing.
Financial experts believe that continuity in governance shall climax this law in the shortest possible time; especially now that the global credit crisis is necessitating governments to make “accounting decisions”.
Forensic audit of affected banks expected in September
Wednesday, 19 August 2009 01:07
SIAKA MOMOH & TAYO FAGBULE
Nigeria Business Day
The report of firms of chartered accountants contracted by the Central Bank of Nigeria (CBN) to undertake forensic auditing of the accounts of the five embattled banks is expected to be turned in by about mid-September.
This ties in with CBN’s decision to confirm infractions, if any, by the recently rescued banks. Business Day’s industry source who gave the list of the Oceanic Bank firms as including KPMG, Akintola Williams-Deloitte and PriceWaterCoopers said the firms have been instructed to turn in their report between first week of September and mid-September.
Forensic auditors are financial detectives employed to audit, investigate and determine accuracy of financial reports, in anticipation or continuation of legal action. Then again, though the terms of reference are unknown, such audits are conducted to reduce or manage risk. Perhaps, the audit is to safeguard CBN’s freshly injected capital.
On Friday, August 14, Sanusi Lamido Sanusi, CBN governor, had announced the sack of the managing directors and executive directors of Union Bank, Intercontinental Bank, FinBank, Oceanic Bank and Afribank Nigeria “due to huge concentrations in their exposure to certain sectors (capital market and oil and gas being the prominent ones), but due to a general weakness in risk management and corporate governance”.
It is plausible that an audit has been contracted ahead of mergers and acquisitions – one of the alternatives through which the CBN hopes to exit the banks and recover the injected capital. Yet, there are signs that the audit is more related with uncovering white-collar crimes. “I think it’s also important to send very clear signals to bank executives that it’s not a crime to make a loss,” said Sanusi in an interview with
Financial Times last June. He also added “but it’s criminal to lie about it”.
Forensic audits help uncover fraud, embezzlement, money laundering and concealment of debt and fraudulent activities. The forensic auditors will be expected to scour through the books – balance sheets, income statements, retained earnings and cash flows – of the banks to unravel any white-collar crime. In all this, the intentions of the CBN remain clear: only errant individuals, for instance, bank executives will be sanctioned. Investors, depositors, employees and the economy will not be put at risk.
PwC, Akintola Deloitte are auditors to 5 troubled banks
Wednesday, 19 August 2009 01:08
IHEANYI NWACHUKWU
Nigeria Business Day
More facts emerged yesterday concerning the auditors of the five troubled banks which the Central Bank of Nigeria (CBN) axed their managing directors last weekend on the account of poor risk management and corporate governance.
Two auditing firms with international reputation - PricewaterhouseCoopers and Akintola Williams Delliotte - are the auditors of the five troubled banks.
While PricewaterhouseCoopers is the auditor to Intercontinental Bank and Oceanic Bank, Akintola Williams Delliotte is the auditor to Union Bank, Afribank and FinBank.
With the well known collapse of the US energy giant, Enron as well as Worldcom and the multiplier effects, the accounting and auditing profession has come under sharp scrutiny by a disturbed and bewildered public and with that, other extraneous factors that, hitherto, had no fundamental on management performance came under searchlight.
Questions are being raised their accountant’s competence and integrity, apart from doubts on the extant standards of corporate governance.
Before the CBN announced its findings on the conditions of the five banks and their activities in the Expanded Discount Window (EDW), their auditors were unable to properly scrutinise and bring to public domain the true state of these reports including their loans portfolio which CBN now put at N2.8 trillion.
When BusinessDay contacted PricewaterhouseCoopers to find out if it is not in the jurisdiction of external auditors to disclose the debt/loan portfolio of companies to their shareholders in their annual reports, Delia Asuzu of PwC brands and communications department told said “it’s unfortunate the person who would have spoken is not in the office” but promised the firm will make public its stand soon.
Over time, especially at annual general meetings, auditors of quoted companies have expressed their opinion that financial statement of companies give a true and fair view of the state of their (companies) financial affairs (in this case the five troubled banks) and that their profits and cash flows are in accordance with the Nigerian Statement of Accounting Standards, the Companies and Allied Matters Act 1990 and the Banks and Other Financial Institutions Act 1991.
Analysts at Thaddeus Investment Advisors and Research Limited said that the auditors need to be sanctioned. “In our opinion, the main auditors of these banks should be penalised. In addition, there should be no more ancestral relationships between banks and auditors. Every five years, each bank must be made to pick a new auditor among those approved to audit banks. Not all auditing firms should be eligible to audit banks.”
Speaking further, they said that the main auditors in Nigeria are multinationals and they should not allow the Nigerian environment to lower their world class auditing standards.
On a research the analysts carried out on one of the five banks (a new generation bank), they noted that weak auditor commentary and net profit fluctuation using tax as a manipulative tool do not bode well for investors in the near term.
However, Eben Akinyemi, a chartered accountant and partner with Tax Ideas, absolved the auditors of any wrongdoing, saying that the books of companies are the companies’ responsibilities. According to him, “an auditor’s primary function is to examine the books as prepared by the company and express its opinion on the books already prepared.”
According to him, “there is what is called management letter from the auditor. This letter contains all fault lines that the auditor would have noticed in the cause of performing the audits. It is not an auditor’s duty to prepare books. The fact that the auditor has expressed his opinion on the truthfulness and fairness of a company’s financial statement does not mean that he has not communicated the faults to the management.”
On whether it is not the duty of auditors to communicate to shareholders of quoted companies as well in the companies’ annual report its loan portfolio, Akinyemi said: “there is need for disclosure of loan portfolio of companies to shareholders in the annual report.”
Meanwhile, when contacted, one of the directors of the Nigerian Accounting Standards Board (NASB) declined comment on the ground that he was not in a conducive environment to speak, adding that his decision to decline “is to avoid public run on the banks.”
Thursday, August 20, 2009
Uproar over list of banks' debtors
EFCC gives deadline for debtors to pay up
SEC queries Okereke-Onyuike
Dangote,Arumeni,Jimoh Ibrahim, others kick
From Martins Oloja (Abuja), Felix Kuye, and Moses Ebosele, Sulaimon Salau (Lagos)
Nigerian Guardian
THE crackdown on debtors, chieftains of the capital market and some sacked helmsmen of the five embattled banks garner momentum yesterday as the Security and Exchange Commission (SEC) and the Economic and Financial Crimes Commission (EFCC) rolled out tougher measures.
This came as individuals and corporate bodies listed as mega debtors by the Central Bank of Nigeria (CBN) published yesterday claimed that they were either servicing such credits or not indebted to the banks at all.
Notwithstanding their assertions, the EFCC has given them one week to clear their obligations with the Afribank Plc, FinBank Plc, Intercontinental Bank Plc, Oceanic Bank Plc, and Union Bank of Nigeria Plc.
SEC, which also went tough on its officials and members linked with the mess in the banking sector, queried the Director-General of the Nigerian Stock Exchange (NSE), Prof. Ndi Okereke-Onyuike over the appearance of the name of a company she chairs on the debtors' list.
At the expiration of the ultimatum, the EFCC threatens to arrest and prosecute such debtors. It said the property of such recalcitrant debtors would be confiscated.
The commission said the short notice was because the debtors are networth persons and companies.
In the steps seen as part of the renewed efforts to protect the integrity of the Nigerian capital market, the Board of SEC yesterday asked Okereke-Onyuike to explain within seven days the circumstances under which the company was listed by the apex bank among non-performing debtors.
At the end of its 43rd meeting held yesterday, the board also called for the immediate suspension of any of the affected executives of the five banks who are members of the Council of the NSE pending the conclusion of investigation of allegations against them by the Central Bank of Nigeria (CBN).
The board also noted the recent developments in the financial market and affirmed its support for the steps taken by the CBN in sanitising the banking system, adding it had mandated its management to intensify surveillance of the capital market and the operators.
In a statement yesterday, SEC's Head of Media, Mr. Lanre Oloyi, said to give the new management of the five banks time to settle down and appropriately brief the market, the commission confirms that it had directed the NSE to place the securities of the said banks on full suspension for two weeks.
Oloyi also said the commission has directed that no securities of a public quoted company should be placed on technical or any other form of suspension without prior approval of the Commission.
"Apart from the five banks whose suspension was recently approved by the commission, the NSE has been directed to forward to the commission, the list of all quoted companies currently on technical suspension, for its review.
"The board of the commission is very concerned about the allegations of alteration in the documentation relating to the underwriting commitment in the African Petroleum (AP) Plc public offer and has mandated management to expedite action on its investigations," Oloyi said.
The EFFC Chairman, Mrs. Farida Waziri, yesterday gave debtors of the five banks a week ultimatum to pay up their debts or face arrest, prosecution and seizure of their assets.
Fielding questions from journalists at the Nigerian Bar Association (NBA) yearly conference holding in Lagos yesterday, Waziri said: "We already have the list of the five banks' debtors with us in the EFCC and they have just one week to bring in their cheques or drafts to us or we begin their arrest and prosecution as well as confiscation of their assets because they are people of enormous means."
She explained that the anti-graft agency went tough on them because of the urgent need to salvage the financial sector from collapse and also restore discipline in all stakeholders in the industry.
"What we are doing with the case of the sacked bank executives should be a strong signal to all the debtors no matter who they are, that we mean serious business on the recovery of these funds. We have been doing it quietly before now because we already made some recoveries but now it is time to go full-blown with them. No one is above the law and our law is no respecter of persons.
"I will advise the debtors, whose names had already been published by the CBN to take advantage of this ultimatum by issuing their cheques and drafts in the name of EFCC for proper and co-ordinated recovery after which we restitute by returning the funds to the appropriate banks," she added.
Waziri challenged members of the Bar, the Bench, the media and the general public on the need to come together to combat the evils of corruption, in the overall interest of the nation. She said that owing to the "pervasive and debilitating effect of corruption on national development," it was important for all stakeholders in the polity to work together to frontally attack all the evils of corruption.
Meanwhile, Okereke-Onyiuke has explained the circumstances leading to Transnational Corporation (Transcorp) Plc indebtedness to the banks.
She said the money was borrowed when Transcorp wanted to acquire 51 per cent stake in Nigerian Telecommunications (NITEL), adding that the firm had earlier raised N22 billion through its Initial Public Offering (IPO) from which it spent N19 billion to service part of the debt.
Transcorp, she said, was in the process of divesting its 51 per cent stake in NITEL, pointing out that when concluded the money raised would be used to clear the debt.
Okereke-Onyiuke also used the opportunity to explain that the figure owed the bank is "relatively high" as a result of "compound interest."
Explaining further, Okereke-Onyiuke, who is also the chairman of Transcorp, said: "I'm not owing any bank in my personal capacity."
Transcorp, according to the CBN owes Union Bank Plc N30.863 billion as at May 31, 2009.
Among those who reacted to the CBN publication yesterday were the Chairman of Obat Oil and Petroleum Company, Fredrick Akinruntan, businessman Jimoh Ibrahim and Rockson Engineering Company.
Akinruntan described the inclusion of his name in the debtors' list as embarrassing, claiming that the report did not reflect the reality on ground.
He was said to be owing Oceanic Bank N4.47 billion.
In a telephone interview with The Guardian yesterday, Akinruntan denied owing any unserviceable loan.
He said he collected N2.5 billion from the bank to develop a property in Abuja and has never defaulted on the terms he agreed with the bank. Akinruntan said the bank should speak up on his claim.
Also, Ibrahim, who is the Group Managing Director of Global Fleet Group, denied owing Oceanic Bank N14 billion. He threatened to sue the CBN for "lying about the amount" involved.
In a briefing in his office in Abuja yesterday, Ibrahim said: "My company did not owe Oceanic Bank N14. 7 billion. The CBN lied on the figure, a development that has affected the credibility of the CBN's regulatory function.
"Oceanic Bank, by a letter dated May 18, 2009, had put all the outstanding debts of all Global Fleet Group at N8 billion as the bank acknowledged receipt of N3 billion I paid in May this year. In the letter acknowledging the receipt, the bank had written that 'the total outstanding on your facilities will be N8 billion.'
He accused the apex bank of unfairness by describing the loan as "non-performing" even after paying N3 billion.
Ibrahim said that "the turnover on the account of Global Fleet Group since inception is over N100 billion and will need Oceanic Bank to do reconciliation and provide evidence of withdrawal to enable us pay.
"I am not out to frustrate Sanusi Lamido Sanusi. The only way CBN can get credibility in the whole exercise is to show that what he is doing is fair and just, accurate and of good conscience, otherwise, he will have to return the bank to the former management," he said.
"If CBN does not apologise for this inaccuracy or do a retraction, I will sue them for damages because I am doing my legitimate business, employing people, paying salaries and taxes and developing my dear country, Nigeria," he added
Similarly, the management of Rockson Engineering Company said yesterday that the funds it allegedly raised from Intercontinental Bank were meant for implementation of the power projects it is handling for the Federal Government, which has failed to release money for the plants.
The projects are the Alaoji (1072MW), Gbarain (225MW), Egbema (338MW) and Omoku (230MW) power stations.
Describing the step taken by the CBN as inaccurate and uncalled for, the Chairman of Rockson, Senator Aniete Okon, said the firm was indebted to Intercontinental Bank to the tune of N14.4 billion and not N36.9 billion as claimed by the apex bank.
His words: "Specifically, CBN claims that Rockson Engineering Limited is indebted to Intercontinental Bank Plc to the tune of N36, 989, 685, 692.84. For the avoidance of doubt, we like to state that our reconciled and mutually agreed commitment with Messrs Intercontinental Bank Plc is N14, 423, 291, 589.49.
"This exposure with Intercontinental Bank Plc derives directly from the provision of credit facilities to substantially fund the letters of credit for turbines and balance of plant equipment for the execution of Federal Government's NIPP comprising the construction of power stations at Alaoji Gbarain, Egbema and Omoku over which our invoices on certified stand at nearly $800 million."
Okon said this "misinformation" has begun to take its toll on the implementation of the power plants as some manufacturers abroad are concerned with the issue and reacting accordingly.
The firm's Managing Director, Mr. J.I. A. Arumemi-Ikhide, however, noted that the fund was collected with due regards to the standard procedure, having obtained the money through a letter of credit from the same CBN.
On classification of the status of the account with Intercontinental Bank as "non-performing," Arumemi-Ikhide said "this is very misleading" and therefore cautioned against actions that could erode confidence in the Nigerian economy. He alleged that the government has not paid the company any money for the project, which he said was now at 70 per cent completion.
From Alhaji Aliko Dangote came a rebuttal of CBN's disclosure, with him claiming that the publication was a gross misrepresentation.
A statement from Dangote Industries stated inter alia: "We refer to the CBN advertorial in various print publications dated 19th August 2009, listing Alhaji Aliko Dangote as a Director and Shareholder of Dansa Oil and Gas Limited, a defaulting customer to Intercontinental Bank Plc.
"We wish to state for the records that Alhaji Aliko Dangote is neither a Director nor a Shareholder of Dansa Oil and Gas Limited as averred. This is verifiable through the Company Registration documents held by the Corporate Affairs Commission (CAC) wherein directors of the said company are listed as: Alhaji Sani Dangote, Alhaji Mohammed Dangote, Mr Ali Dangote.
"It is important to note that Alhaji Aliko Dangote is not the same as Ali Dangote as erroneously published in the CBN advertorial. Ali Dangote is the son of Alhaji Sani Dangote.
"Form CAC7 of the Corporate Affairs Commission shows Ali Dangote's signature which is very different from Alhaji Aliko Dangote's signature. Furthermore Alhaji Aliko Dangote has no part in the management and running of Dansa Oil and Gas Limited.
"A letter has been written to the Central Bank of Nigeria to correct this misrepresentation and to request the removal of the name of Alhaji Aliko Dangote from the list of non-performing debtors of Intercontinental Bank Plc.
"With reference to Dangote Industries Limited's indebtedness to Oceanic Bank Plc to the value of N2,526,460,000.00, we are in dispute over the charges and are very close to resolution.
"A company of our size will take on facilities from bankers and financiers in the course of our business. As a responsible organization, we deliver to our obligations in servicing these loans.
"It is on record that our credit rating remains admirable and our bankers have confidence in our ability to meet our obligations."
Also, Chairman of Global Fleet Group, Jimoh Ibrahim, when contacted on his N14.5 billion indebtedness to Oceanic Bank, described the publication by CBN as laughable.
Labour warns CBN on N400bn bail out
Aug 20, 2009
By Victor Ahiuma-Young & Ifunanya Okafor
Nigerian Vanguard
LAGOS—SENIOR workers in the nation’s financial institutions, yesterday faulted the Central Bank of Nigeria, CBN, over phased implementation of the on-going “Special Examination” of the banks’ accounts which led to the sacking of five banks executives, saying that the action could make the 14 yet-to-be audited banks to cover their tracks and have competitive advantages in an industry that is highly sensitive and volatile.
At a press conference, under the umbrella of the Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), the workers also warned the CBN against converting the N400 billion intervention fund to equity which could lead to the acquisition of the banks through the back doors and may eventually negate the purpose of the bail-out.
Addressing Journalists, Acting President of ASSBIFI, Comrade Sunday Salako, blamed officials of CBN, especially auditors sent to audit the accounts of these banks who after spending not less than six months in the banks, gave the banks clean bills of health and called on the management of the apex bank to also audit itself.
According to him:“This initiative is in tandem with ASSBIFI’s resounding campaign for a thorough overhaul of the financial industry so that the financial sector reforms can percolate down to the real sector of our national economy.
We have severally written to all the regulatory agencies and oversight bodies including the National Assembly Committees on Banking and Financial matters.
“We have raised issues of unprofessional and unethical practices and we believe that the current campaign by the CBN governor must take note of the dire need to deal with the problems of under trading, alienation of the banking system from the real economy, forex abuse and round tripping outsourcing, unreasonable target setting, corporate prostitution of employees, hidden account maintenance charges and unseen interest rate escalation and other prevalent vices.
It is most critical that the CBN must do a soul searching of the activities of its own house because it has conducted several routine and special examinations of these banks and gave them clean bill in recent years, yet the rot in these banks have been on-going for years.”
“The phased implementation of the on-going “Special Examination” of the banks’ accounts which first started with eleven banks, five of which were sanctioned, leaving fourteen banks yet to be audited has the potential of giving competitive advantages in an industry that is highly sensitive and volatile.
“The CBN is urged to look at the feasibility of converting the N400 billion intervention funds into a grant that the banks can pay back after stabilization at terms to be negotiated and agreed with the regulatory body (CBN).
“The highly entrenched mad rush for un-reasonable deposit targets is a major contributory factor in upholding risky banking culture in the country leading to various unscrupulous practices such as corporate pimping/prostitution, money laundering and armed robbery which the CBN must also be more vociferous in combating without sentiments.
A correlated twin-evil to unrealistic target drive is the labour debasing practice of outsourcing, contract or casual staffing which makes it most difficult to be able to vouch for the character and demeanour of employees in a personal service industry that drives the Nigerian economy.”
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