Monday, August 24, 2009

Nigeria News Update: EFCC Delcares Former Bank CEOs Wanted; Crackdown Not Northern Agenda Says Presidency; Who Saw the Crisis Coming?

EFCC declares Ibru, Akingbola wanted

Monday, 24 August 2009 01:25
ISAAC AREGBESOLA
Nigeria Business Day

The uncertainty on the whereabouts of some of the sacked former bank chiefs deepened yesterday as the Economic and Financial Crimes Commission (EFCC) has declared two of them - Cecilia Ibru, former managing director, Oceanic International Bank plc and Erastus Akingbola, former CEO of Intercontinental Bank plc - wanted.

They are wanted for varied offences believed to have led to the critical situations of their banks.

The two were sacked just over a week ago by the Central Bank of Nigeria (CBN) in its post consolidation reform of the banking sector. The commission had in the wake of their sack asked them to submit themselves to it or risk being declared wanted.

EFCC’s action is coming just as Jimoh Ibrahim, owner of Global Fleet, and one of those on the debtors’ list promised to pay back the N8 billion owed Oceanic Bank today, Monday.

Ibrahim who contested the N14.7 billion listed against his name by the CBN, however, said he was owing only N8 billion as at May 2009 having been servicing the facility.

According to the anti-graft agency in a statement released on Sunday, “the two former bank executives are wanted in connection with fraudulent abuse of credit process, insider trading, capital market manipulation and money laundering running into billions of naira.”

Farida Waziri, chairman of the EFCC, according to the statement, directed that the two former bank executives be declared wanted at the weekend following their failure to honour the commission’s invitation.

“Apart from failing to honour the commission’s invitation, intensive search for the two executives in the last one week has not been successful. They obviously went into hiding to evade arrest.

“This development has made it imperative for the commission to solicit for useful information from Nigerians who know their whereabouts.

“In the same vein, it is necessary to warn that anybody who harbours the two former bank executives will be treated as an accomplice or accessory to crime,” the statement added.

Jimoh Ibrahim promised to offset the facility in both foreign and local currencies to a total sum of N8 billion at the corporate headquarters of Oceanic Bank in Lagos on Monday, August 24, 2009. His decision to make the payment was part of the agreement reached at the end of a meeting of the management of his companies in Lagos.

Ibrahim who is also the group chief executive of the NICON Group of Companies, whose subsidiaries include hotels, insurance firms and properties had threatened to go to court if CBN failed to retract the publication where he was said to be owing Oceanic Bank N14.782 billion but which he claimed was only N8 billion and that the loan was performing.

He said he had no ill-feeling against the Central Bank but for its haste to release the publication which, he said, contained some errors. He said no serious business would survive without loans, but that such loans must be regularly serviced by the debtors to sustain its credibility among competitors.

He said as an international business man he had to offset the indebtedness of his companies based on the figures presented to him by his bank.

Reacting to the declaration of the former bank CEOs wanted, Mark Ogbamosa, spokesman to Akingbola, said EFCC’s action negates the principle of rule of law. “Nobody is saying that nothing could have gone wrong but the situation now is that we are putting the cart before the horse”, Ogbamosa said.

Beside declaring him wanted without being formally charged, Ogbamosa said EFCC operatives went to Akingbola’s office alone without Akingbola’s or his lawyers’ presence. “The question we are asking is why should they break into his office? What did they take into the office and what did they take out of the office? To us, this is contrary to the so called rule of law that the president talks about” he said.

Meanwhile, Michael Aondoakaa, attorney general of the federation and minister of justice, has endorsed the steps taken so far by CBN governor, Lamido Sanusi, to sanitise the banking sector.

In a press statement signed by his media assistant, Onov Tyuulugh, the AGF praised Sanusi’s patriotism and courage and called on all Nigerians to support the apex bank in the new effort to reposition the nation’s banks.


EFCC cracks down on corporate tax evaders, shuts airline

Monday, 24 August 2009 01:27
Wale Haastrup

The Economic and Financial Crimes Commission (EFCC) has in the past week recovered billions of naira and arrested a numbere of top officials of firms operating in the aviation industry for alleged corporate tax evasion.

Already, some top officials of firms have been arrested and are co-operating with the EFCC on how to effect payments, which a source at the anti-graft agency says runs into billions of naira.

An airline, Wings Aviation, was shut down by EFCC on Friday and its top officials were also picked up to explain why the firm’s tax returns were not up to date.

Femi Babafemi, spokesman for the EFCC, confirmed to Business Day the closure of the airline but would not say whether arrests were made.

“We are in the aviation industry now, after we were through with the hotels, seeking for corporate tax evaders. Many people here pretend not to know that corporate tax evasion is a crime”.

According to him, “we have recovered billions of naira; unfortunately I do not have the actual figures to give you now. But our aim is to recover the money and prosecute the heads of the firms and agencies and use them to set examples that tax evasion is a crime”.

BusinessDay gathered that many top brass of the agencies, firms and airlines are now sourcing for funds to pay up, while others are consulting tax experts to explain their tax payment positions.

It was gathered that the EFCC was already inspecting books of all the agencies in a bid to stave off tax defaults.

Said a source: “They came here and inspected our books at the accounts and audit department. It’s like they know what they were looking for as they were asking for specifics”. Though, they were in the agencies for several days, our source said most of the books were in good order as the agency had nothing to say after their inspection.

Many aviation firms, particularly airlines have over the years formed the habit of not paying their taxes including charges collected on behalf of the Federal Airports Authority of Nigeria (FAAN), Nigerian Airspace Management Agency (NAMA) and the Nigerian Civil Aviation Authority (NCAA).

At a time earlier in the year, the airlines owed FAAN over N5 billion and the NCAA close to N500 million.

While FAAN contracted Maevis Nigeria Limited to help it collect its debts and charges, NCAA contracted the collection of its debts and charges to IATA. Domestic airlines had even dragged NAMA to court over payment of terminal navigational charges.

Meanwhile, airlines that have not been paying their staff salaries regularly may be forced to close shop, as the Federal Government considers such development inimical to flight safety.

This may have prompted EFCC’s investigations in the aviation industry, in order to ensure safety of lives and property.

“You know, by standard, once an airline is not paying its staff regularly, the staff would no longer be committed to their work, leading to lackadaisical attitude to a crucial issue as safety”, our source said.

It was gathered that as soon as the reports are finalized, the EFCC will swoop on the industry and just about four or five airlines may scale the hurdle.

It would be recalled that the director general of the NCAA at the start of the economic audit of airlines had declared that airlines found not able to guarantee safe operations would be advised to close shop.

According to the NCAA boss, “the main thrust of this exercise is to ensure that the airlines have enough funds to carry out safe operations and if NCAA is convinced that an airline can no longer carry out safe operations, that airline will close shop.

“In this meltdown, we want to ensure that safety is not relegated, you must do your maintenance, train your crew and you must pay your bills. This is the economic audit we are talking about; we don’t want a situation where you don’t have enough funds to run a safe operation. If you don’t have this, you can’t be here and this audit has started about a week ago and it is going to be an ongoing exercise.”

In beaming its searchlight on airlines operating in the country, “we are looking at some issues like default in the payment of salaries, fuel, payment on insurance, a lot of bad debts”.

Demuren said it is possible to owe a fuel marketer, once the airline is credit worthy, but once the airline stops servicing debts, then there is problem.

“For instance, if you buy a N200 million worth of fuel everyday, you cannot pay that everyday, you already have a credit line with the marketer. If you are credit worthy, you can owe but if you don’t service your credit, you don’t pay your debts, it shows that you are not credit worthy”.

However, according to the NCAA boss, insurance, is a no go area as airlines must be up to date with their premium or they would not be allowed to carry passengers. “We have learnt our lessons from what had happened in the recent past.”

He said another area of concentration would be how much airlines are owing the various agencies such as landing and parking charges, rent and navigational charges to NAMA for those doing international operations, charges to NCAA, the Nigerian Aviation Handling Company (NAHCo) plc and the Skypower Aviation Handling Company Limited (SAHCOL).

“If any airline is owing in all these categories, it shows something is wrong, you can owe but you must be credit worthy. We are watching these very carefully and the oversight team is already looking at this. Let me say what is the most important, we must ensure that safety is not jeopardized because if safety is jeopardized, the industry is gone”, he said.

Demuren stated that the concept is about safety and safety cannot be compromised or jeopardized, adding that at the initial stage, what was promised was that safety is number one and the goal has not changed.

“The goal is zero accident and that is what we want to achieve”.


Stocks fall 10% in week after bailout

Monday, 24 August 2009 01:28

Nigeria Business Day

Equities on the Nigerian Stock Exchange (NSE) fell further at the close of trading on Friday, bringing total losses since the Central Bank of Nigeria (CBN) announced a N400 billion banking industry bailout a week ago to almost 10 percent.

The NSE All Share Index (ASI) dropped 0.9 percent on Friday to 21,973 points, its lowest level in more than three months, with two banking stocks among the few gainers for the first time since the bailout. The ASI had dropped by 1.79 percent on Thursday.

Guaranty Trust Bank and Diamond Bank, which had received clean bills of health from government auditors, were two of only 11 gainers on the index of more than 200 companies.

They rose 4.9 percent and 3.9 percent, respectively.

Banking stocks have led the decline on the stock market for much of the week.

Analysts at FSDH Securities Limited put the return on the NSE ASI year-to-date (YTD) at 30.13 percent.

Specifically, the loss recorded in the index was on account of depreciation recorded in the share prices of some highly capitalised stocks such as Zenith Bank, UBA, Ecobank Transnational Incorporated, African Petroleum and Total. The market capitalisation also depreciated by 0.91 percent to close at N5.04 trillion, compared to the loss of 1.79 percent closing at N5.08 trillion on Thursday.

A cursory look at the market’s performance over the past two weeks showed that the NSE ASI closed the week ended August 7, 2009 at 25, 382.5 and had dropped by 4.51 percent during the week ended August 14 2009, to close 24,237.85.

It is believed that the CBN’s N400 billion capital injection into Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank has knocked confidence in Nigeria’s financial sector.

The apex regulator has completed audits of three other banks but the country’s remaining 14 institutions are still being probed and investors are nervous that more bad debts may be exposed.

The CBN on Wednesday published a list of more than 200 firms, individuals and state bodies including conglomerates Transcorp, and fuel distributor African Petroleum identified as defaulting debtors of the banks.

Some of the debtors have denied holding non-performing loans but the extent of the bad debt built up at the five banks put at N1.14 trillion by the central bank has raised concerns about which companies might be affected.


Banking sector reform not Northern agenda, says Presidency

Says Sanusi action is yielding positive results

Yar’Adua returns Tuesday

By Daniel Idonor
Nigeria Vanguard

THE Presidency Monday rose in strong defence of the new reform initiated by the Central Bank of Nigeria (CBN) for the country’s banking sectors; declaring that the ongoing reforms is aimed at salvaging the sector from imminent collapse, and not to promote so-called northern agenda as perceived in some quarters.

The Presidency said it is not unaware of a possible shock and hiccups with the reform by the CBN which may trigger some negative actions from those affected, including very powerful interests like in the days of Soludo’s consolidation, but warned that neither the President nor the government would be move by such actions.

After one week trip to Saudi Arabia for scheduled medical check-up and the performance of the lesser hajj, which began since Friday, 14th of August, 2009, President Umaru Yar’Adua is expected in Abuja Tuesday.

Presidential Spokesman, Mr Olusegun Adeniyi, who fielded questions from State House Correspondents, on feelings in some quarters that the reform is targeted at weakening the existing stronghold of the southern part of the country on the economy, stated that it is laughable for anyone to hold such opinion.

“I am aware there will be a few initial shocks and hiccups with Sanusi’s reform like it happened during Soludo’s consolidation exercise and that those affected will fight back and we are talking of very powerful vested interests here. But the President is convinced it is the right course of action by the CBN to avert what could turn out to be a national catastrophe in the financial sector and that is why Sanusi has his unwavering support”, he said.

He explained that if the recent action of the apex bank was targeted at undoing the southern part of the country through the promotion of a northern agenda, the same CBN would not have resorted to empowering the banks pumping over N42 billion to save them from collapsing.

“When people don’t want to address the real issues in Nigeria, they resort to cheap talk about some Northern or Southern agenda; are you saying that these bankers were distributing their money with southerners? I recall that when Prof. Chukwuma Soludo came up with Banking Consolidation in 2004, there was also an outcry by some bankers who were losing out with the campaign that Soludo was pursuing Igbo agenda. But looking back today, assuming Soludo had not consolidated the banks then, we would not even be talking of any banking sector today”, he affirmed.

Adeniyi stressed that “to come back to the point, if we were to assume Sanusi took the action he did in promotion of a so-called Northern agenda, then we should ask some questions: why would CBN pump in about N42 billion to bail out the five banks owned by people we have identified not as Nigerians but Southerners? Why would he appoint Southerners to replace the ones he removed? Why would he use our collective wealth as a nation to stabilize the savings of people who, if we buy the current argument, are Southerners?”

While advising Nigerians to “focus on the real issues”, he stated that the ongoing reforms “is a national agenda in the interest of depositors whichever part of the country they come from because we cannot continue to live a lie. Nobody has disapproved the fact that there were serious holes in those five banks and in any case, it was already common knowledge that at least three of those3 banks were in serious crises before Sanusi move in so what are these people talking about?”

He disclosed that the federal government was comfortable with the Sanusi led reforms ande urged Nigerians to cooperate with him and the new management team already put in place; saying that “I think Sanusi’s intervention is already yielding positive results”.

“On my way to Lagos last week to attend Prince Tony Momoh’s 70th birthday book launch I sat with a prominent bank chief who said that all the big debtors in most of our banks who had hitherto refused to honour their obligations had started paying back. That this the way it should be, you don’t collect loans from banks and begin to live as if you just won lottery.

According to him, the action of the affected bankers should be considered as fraud, asking that “If that is not fraud what is it since the bankers were quite aware that the money they were giving out so casually and irresponsibly is the life savings of some people?”

He explained that “you and I know how difficult it is for any businessman with brilliant ideas to secure a loan of between N1 million and ten million naira from our banks and I can speak from the experience of several friends. Yet some fat cats will walk into these same banks and collect billions of Naira on the basis of man-know-man without any form of security.

“Please don’t get me wrong, I am not saying it is wrong to borrow from banks but when you borrow money from the bank, you must realize there is a corresponding responsibility to pay back. The management of our banks must also recognize that the deposits in their vaults are held in trust”, he stressed.

On the President’s trip to Saudi Arabia and his expected return, Mr Adeniyi said “Yes, the President returns tomorrow (today) having completed his medical checks early last week before performing the Umrah”.


Who saw the bank crisis coming?

Monday, 24 August 2009 01:24

MAX AMUCHIE
Nigeria Business Day

In a much celebrated article entitled: ‘The Agenda-Setting Role of the Mass Media in the Shaping of Public Opinion’, Maxwell McCombs, a professor at the University of Texas, Austin, United States notes: “The power of the news media to set a nation’s agenda, to focus public attention on a few key public issues, is an immense and well-documented influence. Not only do people acquire factual information about public affairs from the news media, readers and viewers also learn how much importance to attach to a topic on the basis of the emphasis placed on it in the news. Newspapers provide a host of cues about the salience of the topics in the daily news – lead story on page one, other front page display, large headlines, etc.

Television news also offers numerous cues about salience – the opening story on the newscast, length of time devoted to the story, etc. These cues repeated day after day effectively communicate the importance of each topic. In other words, the news media can set the agenda for the public’s attention to that small group of issues around which public opinion forms.”

The principal outlines of this influence had been sketched as far back as 1922 by Walter Lippmann in his work, ‘Public Opinion’. According to Lippmann, the news media are a primary source of pictures in our heads about the larger world of public affairs, a world that for most citizens is “out of reach, out of sight, out of mind.”

One can therefore appreciate the critical role of the media as the fourth estate of the realm, a tag that has stuck since Edmund Burke, the 19th century British parliamentarian and political philosopher assigned the fourth position to the media in a realm that comprises the executive, the legislature and the judiciary in that order. What we know about the world is largely based on what the media decide to tell us. More specifically, the result of this mediated view of the world is that the priorities of the media strongly influence the priorities of the public. Elements prominent on the media agenda become prominent in the public mind. If the media fail, the society is doomed. In BusinessDay this is taken seriously.

The agenda of a media house is found in its pattern of coverage of public issues over some period of time, a week, a month, an entire year. Over this period of time, whatever it might be, a few issues are emphasised, some receive light coverage, and many are seldom or never mentioned. It should, however, be noted that the use of the term ‘agenda’ here is purely descriptive. There is no pejorative implication that a media house like BusinessDay ‘has an agenda’ that it relentlessly pursues as a premeditated goal. The media agenda presented to the public results from countless day-to-day decisions by BusinessDay journalists and board of editors about the issues of the moment.

The beginning of this year presented a clear picture of the shape of things to come and BusinessDay seized it and foresaw the sequence of events that culminated in the sack of five chief executive officers of Nigerian banks on Friday, August 14.

For five days, February 16 to 20, BusinessDay ran a series on the Nigerian banking sector. It was a time that there was anxiety and excitement over the reappointment or otherwise of the former governor of the Central Bank of Nigeria, Chukwuma Soludo. The professor of economics was appointed in 2004 and his coming led to consolidation in the Nigerian banking industry, an exercise that saw banks move their capital base from a paltry N2 billion to a minimum of N25 billion.

Initially, the move was criticised, but when at the end of 18 months period 25 banks scaled the huddle, consolidation was hailed as the best thing that had happened to the Nigerian banking industry.

However, for keen observers and for BusinessDay board of editors, there were challenges and miscues that needed to be addressed, questions that needed urgent answers and measures that needed to be taken to steer the Nigerian banking sector away from a path of destruction.

It has become public knowledge since the landmark decision of the sack of the five CEOs on August 14 that the huge debts totaling more than one trillion naira that crippled the five banks had to do with loans related to the capital market and the oil and gas sector.

The present governor of the CBN, Sanusi Lamido Sanusi, while announcing the decision to sack the five managing directors, attributed the crisis in the banking sector to a failure of regulation over time. Long before then, BusinessDay had recognised the nexus between the margin loan crisis and weak regulation.

The paper’s lead story on Tuesday, February 17, 2009, was entitled: ‘How regulatory failure created margin loan crisis’. BusinessDay wrote: “A failure of regulatory oversight by the monetary authorities, charged with the responsibility to monitor and supervise how banks lend and disburse loans in the financial system, has been identified for the massive margin loan crisis hanging over the banking industry.

“The banking regulator, the Central Bank of Nigeria (CBN) is believed to have taken its eye off the ball while a number of banks moved recklessly into the capital market to perpetrate unwholesome practices designed and calculated to shore up the value of their shares in the capital market.”

We further went to report that the CBN only moved to play its oversight role after the crisis had deepened, and even when it did, its measures were targeted at general monetary concerns.
The next day, BusinessDay’s lead story was ‘Outrage as CBN lends to some banks at 11 percent’. The story reads: “The Central Bank’s expanded discount window through which it acts as lender of the last resort to the nation’s banks was opened a bit wider some months ago but access was initially fixed at an outrageously low eleven percent per annum.

“Almost a trillion naira was extended to the banks since September when access through the window was eased but some bankers thought it was unwise and indeed curious that the Central Bank will extend credit to banks at eleven percent interest rate at a time when deposits could command as much as 16 or even 17 percent.

“Expectedly a deluge of requests came in from the banks, some simply because they could not just sit there watching their competitors profit from a seemingly unusual handout from the lender of last resort.”

The story quoted a banker who said: “All over the world, when you reach out to the lender of last resort, what you get is at a premium. But here banks were to all intents and purposes being rewarded instead of being punished.”

On page 53 of the same edition, we ran a story entitled, ‘With blurred supervision, banks are back to cooking the books’. In the story, BusinessDay writes, “Declarations of bogus profits and failure to disclose toxic assets have crept into Nigeria’s banking system. And analysts, worried by the trend, say banking in the country has gone back to the old days when banks kept more than one statement of account for different purposes.

“But the understanding of many was that the Central Bank of Nigeria would be up to the task of supervising and discouraging banks from cutting corners. Information reaching BusinessDay indicates that the apex bank may have been looking the other way while banks cheated their shareholders of billions of naira.”

On Thursday, February 19, 2009, BusinessDay came out with a lead headline ‘CBN’s lax supervision set stage for irregular financial reporting’. According to the report, CBN’s laxity in effectively monitoring financial reporting by banks had put it at daggers drawn with Nigerian Accounting Standards Board (NASB) charged with the task of ensuring compliance with set standards of financial reporting in Nigeria which is in line with international accounting standards.

For instance, according to the story, analysts expressed surprise over lack of details by the banks which supply only basic information as profits, earnings, shareholders’ funds at the exclusion of important details such as unsecured consumer credits, trade finance exposure, equity markets risk, corporate lending risk, sovereign fixed income as well as significant potential for foreign currency risk as point of large scale asset and liability transactions with international counterparts.

And on Friday, February 20, 2009, the last day of the series, which was three months ahead of the end of the tenure of Soludo as CBN governor, BusinessDay predicted that he would not be reappointed and took the public through reasons he was unlikely to get a second term in office.

Quoting an advisory by Eurasia, the leading political risk research and consulting firm based in New York, the United States, BusinessDay catalogued a number of CBN’s policy somersaults, condescending statements talking up the economy and flip-flops which together with other issues have helped to dent Soludo’s chances of re-appointment.

The report reads: “Soludo’s current five-year tenure ends in May. While Soludo gained widespread international respect for his leadership in pushing banking sector reforms and a massive consolidation of the Nigerian banking system under the Obasanjo administration, his recent miscues on the direction of inflation and currency policy have left his much vaunted credibility damaged. Whoever replaces Soludo from Yar’Adua’s inner circle is likely to be more strongly market interventionist than Soludo, who had until recently been fairly neo-liberal in his policies.”

Since Sanusi sacked Erastus Akingbola of Intercontinental Bank, Cecilia Ibru of Oceanic Bank, Okey Nwosu of FinBank, Barth Ebong of Union Bank and Sebastian Adigwe of Afribank, it has become public knowledge that they were the main beneficiaries of the controversial expanded discount window, had cooked books to hoodwink the public and their shareholders and exposure to margin loans. BusinessDay foresaw the present crisis and faithfully discharged its responsibility to the public, but nobody, not even the authorities paid attention.

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