Tag: cbn

chase this investment.

iii. It is worthy of note that in the letter seeking Mr President’s approval for the investment, it was stated explicitly that all the member central banks were treating their investment as part of their external reserves.

iv. It was also alleged that, till the date of the issuance of the Briefing Note (7th June, 2013), the CBN had not received its share certificate for the apex Bank’s investment in the IILMC. However, the said share certificate, dated 6th April, 2013, has indeed been received and is hereby annexed as Annexure O.

26. Non-adoption of IFRS Standards

Briefing Note Allegation 26: that the CBN did not comply with the IFRS accounting standards in preparing its 2012 financial statements.

Response:

i. It has been and remains a cardinal policy of the CBN to comply with statutory requirements and policy guidelines of regulators. In recognition of the peculiar nature of the CBN as a central bank and its peculiar responsibilities, its migration to the IFRS would require extended time to comply with the Act.

ii. In view of this reality, I wrote the FRCN via a letter dated 14thFebruary 2013, requesting for a temporary exemption to allow the CBN prepare the 2012 financial statements based on the existing financial reporting framework.

iii. The FRCN waived the requirement for the CBN to comply with the IFRS standards in preparing its 2012 financial statements by its letter of exemption dated 26 February 2013. See Annexure Pfor the FRCN’s letter.

iv. In January 2010, the published Report of the Committee on the Roadmap for the adoption of IFRS in Nigeria (the Roadmap), allowed Public Interest Entities, in the nature of CBN,to delay the adoption of the IFRS financial statements until 31 December 2013. See Annexure Q for the Roadmap.It is probably for the same reason the FRCN itself did not prepare its audited financial statements in accordance with IFRS for the year ended 2012.

v. It is worth noting that very few Central Banks in the world are able to comply with IFRS due to a number of factors peculiar to the nature of central banking, especially in the following areas:

a. Accounting for Change in the value of Gold reserves.

b. Management of government foreign exchange reserves and exchange rate fluctuations.

c. Disclosure challenges around monetary policy interventions and its activities as lender of last resort to financial institutions, and guarantor to government borrowing.

d. Valuation of assets held in foreign currencies.

e. Challenges around weekly Treasury Bill sales.

f.Management of years of deficit after surplus has been transferred to the government in the year of surplus.

g. Funding government deficit financing as enshrined in section 38 of the CBN Act 2007.

27. Non-Compliance with ITF Act

Briefing Note Allegation 27: that the CBN failed to comply with the ITF Act by not paying the mandatory one per centum of the amount of its annual payroll to the ITF.

Response:

i. The CBN, at the time, contested in court its obligation to pay one per centum of its payroll to the ITF on the ground that the CBN is not engaged in commerce or industry, which under the ITF Act is the basis for an employer to make payments under the ITF Act.

ii. However, upon further considerations, the matter was amicably settled by the CBN and ITF. The CBN has duly complied with the ITF Act and has paid all levies up to the 2012 financial year. See Annexure R, which bears this out.

28. AUDITING

Briefing Note Allegation 28: that the joint auditors of the CBN’s financial statement did not certify that the accounts give a true and fair view of the financial position of the CBN as at 31 December 2012.

Response:

i. Without any iota of evidential proof, and in a most sweeping statement,the FRCN Briefing Note alleged that the joint auditors’ opinion was a technical qualification; that the accounts should not be relied upon for decision-making.

ii. To set the records straight, auditors do not certify accounts but only express opinions on the financial statements.

iii. The joint auditors stated that the CBN’s 2012 financial statements were properly prepared and accorded with accounting policies and the provisions of the CBN Act 2007 and other applicable regulations.

iv. The opinion, as expressed by our auditors, is consistent with what obtains in respect of central banks in a number of other jurisdictions. We enclose by way of example, a sample of opinions relating to the central banks of the United States of America, South Africa and Ghana. See Annexure S. The allegation made by the FRCN in relation to this aspect of the auditors’ report is troubling when viewed in this light.

29. Non-consolidation of accounts with Subsidiaries

Briefing Note Allegation 29: that the CBN did not consolidate its account with those of its subsidiaries.

Response:

i. The CBN does not have subsidiaries and the assumption that AMCON is a subsidiary of the CBN is wrong. The shares in AMCON are held by the Federal Government as borne out by Section 2 of the AMCON Act. Furthermore, the accounting reporting period of the CBN is statutoryand does not coincide with that of AMCON.

30. Abridgement of Financial Statements

Briefing Note Allegation 30:that the financial statement was highly abridged, with poor disclosures of transactions and events of a financial nature.

Response:

ii. The financial statement cannot by any stretch of the imagination be described as “highly abridged”. Rather, all transactions in the financial statement were substantiated and were prepared in line with the CBN’s framework with all relevant notes, schedules and disclosures copiously made for clarity.

31. Non- Challance and AMCON’s Operations

Briefing Note Allegation 31: that AMCON made a loss (after taxation) of N 2,439,701,422,000 (over N 2.4 Trillion) and also had a negative total equity ofN2,345,620,364,000 (over N 2.3 Trillion) at the end of 2011. The FRCN alleges that I should have brought it to the attention of His Excellency, Mr President, that a large portion of the AMCON bonds would be due for redemption by 31 December 2013 and that the inability of the Federal Government to fulfil the guarantee may affect the credit rating of Nigeria negatively. In other words, the CBN breached its statutory objects under Section 2(e) of the CBN Act by not drawing His Excellency’s attention to the matter.

Response:

i. A major achievement of the Central Bank was that the AMCON bonds in question that matured at the end of 2013 were successfully redeemed without any budgetary appropriation or call on the Federal Government to guarantee the repayment as referenced above.

ii. It must be emphasized that AMCON bonds are not instruments issued by the CBN. On that score, it would be most inappropriate and against every known principle of standard accounting convention for the CBN to incorporate full disclosures on the maturity profile of AMCON’s bonds in its audited financial statements (balance sheet and notes).

iii. Rather, in accordance with international best practice, the CBN is only required to disclose in its accounts, the portion of the bonds held by it (the CBN). To this extent, the CBN made appropriate disclosures in the financial statements on the bonds it held as at 31 December 2012. See Annexure T – which is note 6 to the CBN’s 2012 financial statements showing the amount CBN has invested in AMCON bonds.

32. Non-approval of 2012 financial statement by CBN Board

Briefing Note Allegation 32:that the date of the Board’s approval of the financial statements was not indicated or disclosed and accordingly, the response provided to the President’s request for clarifications indicated that the management letter on the financial statements was yet to be discussed by the Board Audit and Risk Management Committee.

Response:

i. The financial statements were presented to the board and approved on 26 February 2013. The date of approval was stated clearly on the balance sheet page behind the signature of each of the directors. (See Annexure Ufor a board approval dated 26 February 2013 approving financial statements).Issues of a material nature requiring adjustments had been fully incorporated into the Financial Statement prior to presentation to the Board.

ii. The items in the Management Letter were suggestions for improvement made by external auditors and these were subsequently considered by the Board Audit and Risk Management Committee and are being implemented by Management on an on-going basis.

33. Compliance with the PPA

Briefing Note Allegation 33:non-compliance with the provisions of the Public Procurement Act (PPA).

Response:

i. The only issue that has been raised to the knowledge of the CBN, is that the CBN,over a period in the past,did not obtain ‘Certificate of No Objection’ from the BPP before awarding contracts.

ii. On 11 August 2008 (before my tenure), the CBN wrote to His Excellency, President Yar’adua, requesting for certain exemptions in CBN’s procurement process.See Annexure V.On 20 August 2008, the President gave his approval to the CBN’s application. See Annexure W.

iii. In line with this approval, the CBN continued to approve its contracts in full compliance with the Public Procurement Guidelines, with the only exception that it did not apply for a ‘Certificate of No Objection’ based on the Presidential waiver.

iv. It should be noted that the CBN’s own procurement process is more or less identical to the procurement process under the Public Procurement Act(PPA). Indeed, the BPP has had occasion to write in the past commending the CBN’s commitment to transparency and making recommendations for further improving the process. See Annexure X.

v. In the course of the CBN interaction with the BPP on this subject, we provided an explanation by way by a letter of 11 August 2013, informing the BPP of the Presidential waiver. After an exchange of correspondences between the CBN and the BPP on this issue, the BPP disagreed that the Presidential waiver constituted an exemption from the requirement to obtain a Certificate of No Objection and insisted that the CBN should start doing so.

vi. The CBN, out of an abundance of caution, immediately began to obtain Certificates of No Objection in respect of subsequent procurements within the stipulated threshold. In this regard, the CBN did obtain Certificates of No Objection dated 17 December 2013, 31 December 2013 and 14 February 2014. See Annexure Y [A-D] for these.It is important to note that the contracts for which these Certificate of No Objections were issued were approved based on the same process that apply to all the other contracts approved by the Bank. This, in itself, is testimony that the Bank has always complied with the provisions of the Act.

vii. It is also important to note that in October 2013, the BPP-appointed consultant (Messrs SadaIdris& Co) also gave the CBN a good bill of health after reviewing the bank’s procurement processesfor 2010and2011.See Annexure Z. In its final report, the consultant in fact mentioned that the CBN satisfactorily complied with the provisions of the PPA.

viii. Furthermore, the CBN has facilitated compliance with the provisions of the PPA by making it a requirement for entities seeking to access the CBN Intervention Projects Fund, to comply with the PPA and to obtain a Certificate of No Objection to Contract Award, where required. See Annexure AA for the BPP Letter of No Objection of 12 October 2010in relation to procurements by the Nigeria Police Force.

34. Unlawful Expenditure on CBN Intervention Projects

Briefing Note Allegation 34: that CBN Interventions in areas like Education,Community, etc. are unlawful.

Response:

i. A principal focus of the CBN Corporate Social Responsibility (CSR) policy in the last decade (even before my tenure) has been the Educational sector in Nigeria. The CBN Act lists its objects, functions and prohibited activities, and the Board is empowered to approve the budget and formulate policies of the CBN. The Intervention Projects mentioned are CSR interventions that fully comply with the CBN Act and were duly approved by the Board.

ii. It is worth noting that the CSR policy of the CBN is consistent with the activities of many other central banks of developing countries including, Bank Negara Malaysia, the Bank of Namibia, the Bank of Botswana and the Bank of Indonesia.

iii. The Federal Governmentof Nigeria has been aware, supported and encouraged the CBN intervention projects, in recognition of their positive contribution to development.

iv. During the recent strike by the Academic Staff Union of Universities(ASUU), the CBN intervention projects in universities were an important fulcrum in the settlement negotiations between the FG and ASUU as borne out in the Memorandum of Understanding between the FG and ASUU, where the Intervention Projects were recognised as part of the contributions of the FG to Education in tertiary institutions.

v. Furthermore, the FG standing committee on the Implementation of Needs Assessment of Nigerian Public Universities requested that the CBN channel a portion of its annual budget to the identified projects. See Annexure BB- TheInterim Report of the Technical Sub-committee of the Committee on the Implementation on Needs Assessment of Nigerian Public Universities.

vi. A major aspect of the CBN intervention projects is the Centre for Excellence, which are not merely physical structures. The CBN entered into Memoranda of Understanding with partner Universities to develop a holistic and multi-faceted scheme which includes the establishment of Centres for Excellence under which the CBN would, in the principal areas of Economics andFinance, fund the endowment of Professorial Chairs, create access for Nigerian students to participate in virtual and remote learning with foreign tertiary institutions like Harvard, Princeton, Oxford Universities, and special programs for students of Business and Economics. In this regard, the CBN is in the process of establishing Centres for Excellence across the geo-political zones of the country including:

Ahmadu Bello University, Zaria

•University of Nigeria, Enugu

•University of Ibadan, Ibadan

•Nigeria Defense Academy, Kaduna

•University of Lagos, Lagos

•University of Maiduguri, Borno

•University of Port Harcourt, Rivers

•University of Jos, Plateau

•Bayero University, Kano

vii. Consistent with our policy of development, upon the instruction of His Excellency, the President, the CBN intervened by paying N19.7 Billion to the Ministry of Police Affairs for the purchase of armoured helicopters and other security equipment.

viii. Also, upon the application of the Secretary to the Government of the Federation, the CBN paid N2.1 Billion for the automation and renovation of the Federal Executive Council Chamber. See Annexure CC.

ix. The CBN also initiated, with His Excellency, the President’s approval, the construction of the International Conference Centre for Nigeria. See Annexure DD.

x. His Excellency, the President, also requested that the CBN pay N3.2 Billion for the construction of a new counter terrorism centre for the office of the National Security Adviser.See Annexure EE.

xi. The FRCN itself is a beneficiary of the CBN’s intervention policy as the CBN paid the sum of N220 Million to the FRCN and also organised the banking sector, through the Banker’s Committee, to payN280 Million, totalling a sum of N500 Million, for the construction of the IFRS Academy. See Annexure FF.

xii. All of these requests were duly submitted to the CBN Board of Directors and were duly approved.

xiii. It is also important to emphasise that the grants under the Intervention Program were duly budgeted for, and made on a limited and selected basis.

xiv. Intervention in National Security: At the height of security uncertainties in Nigeria, the Ministry of Police Affairs petitioned His Excellency, the President, for access to the CBN Intervention Fund. His Excellency approved that this be done in his letter of 6 October 2010 referenced MPA/PSD/S/0243. See Annexure GG. The CBN Board of Directors then reviewed and approved this request. See Annexure HHfor the issuance of a grant by the CBN from the Intervention Fund to the Nigerian Police Force, for the procurement of:

•Armoured Helicopters,

• Armoured Patrol Vans,

• Anti-Riot Equipment;

• Hand held Communication Equipment.

35. Akingbola Petition &the N40 Billion Loan Waiver

Allegation 35: attached to the my letter of suspension was a petition written by the former Managing Director of the defunct Intercontinental Bank Plc (ICB now Access Bank Plc)- Erastus Akingbola (MrAkingbola), on an alleged waiver of a N40 Billion loan to a Nigerian bank.

Response:

Before responding to the allegation, it should be stated that the said MrAkingbola is a man found by a final judgment of the Courts in England to have been liable for financial improprieties in the management of the affairs of ICB.

i. In his self-serving petition, MrAkingbola alleged that the CBN, on my watch, wrote-off a loan in favour of Dr. Bukola Saraki. This is untrue.

ii. The CBN was at no time involved in the decision of ICB (or any other bank for that matter) to write-off its loans. The CBN never gave prior approval to the Management and Board of ICB to write-off any particular loan. It is important to state up-front that all the non executive directors on the Board of ICB were appointed by its shareholders while Akingbola was CEO and they were the majority on the Board that approved the write-offs.

iii. From the submissions of ICB to the CBN, the said loan write-off, involved over 1000 customers accounts, totalling N49.07 billion – including accounts held by companies related to Dr. BukolaSaraki.

iv. It is well known that decisions on loan write-offs in the process of recovering non-performing loans are taken by the management and board of banks in line with their internal credit policies. The outstanding amounts are then written off the books of banks after receiving approval of the CBN. ICB therefore only approached the CBN, after it has completed all its negotiations and agreements with its customers, to seek CBN ‘ No Objection’ approval to write-off the loans. Indeed, after a careful review of the submission by ICB, the CBN initially raised objections to the justifications provided for the write-off of the debts on the accounts related to Dr. BukolaSaraki. See Annexure II.

v. In response to these objections, the Management of ICB wrote explaining the rationale for the Board decision. (This is also contained in Annexure II). It is important to note that decisions on loan write-offs involve significant exercise of judgement by those involved. Usually a number of factors come into play including whether or not the loan is secured, the value of collateral and if the bank is in a legal position to realise same, the general liquidity in the secondary market and the liquidity position of the bank itself which determines if it is negotiating from a position of strength or weakness. Ultimately, while we may debate these issues, the judgement has to be exercised by those actually managing the bank in the best interest of shareholders and the responsibility lies with them.

vi. In the case of ICB it is well known that the bank was in a grave situation as a result of years of mismanagement by Akingbola. The loans in question were largely loans secured by shares in the capital market and therefore were vulnerable to what is called Market risk. The collapse of the Nigerian capital market following the Global Financial Crisis in 2008 meant that the collateral for these loans had been totally wiped out. The losses suffered by the bank were therefore a result of very bad credit decisions taken by Mr. Akingbolahimself which led to the bank taking on huge amounts of risk that crystallised. In this situation all that was left for Management was to minimise its losses and recover as much as it could before the situation got worse.

vii. With specific reference to the ICB loans to companies related to Dr Saraki, the bank’s Management explained that there were four loans totalling N9.489 billion, of which three were margin loans secured by shares and the fourth was secured by real estate. The value of the collateral underlying the Margin loans had been eroded and the bank was compelled to give waivers to make some recovery while still retaining the shares for sale at a future date. It should also be added that the real estate used to secure the non-margin loan were not perfected by the management under Mr. Akingbola – which is another indication of bad credit policies under Mr. Akingbola.

viii. There was no waiver granted to Dr Saraki on the fourth loan as it was paid in full (plus accumulated interest). Of the N9.4 billion, a total of N4.04 billion was repaid, representing a waiver of 57.42 %. Losses on Margin loans were common at this time in the entire industry. To illustrate this, when AMCON purchased margin loans from Intervened banks on December 30, 2010 it offered a premium of 60% above the average price of the shares in the preceding 60 days. In spiteof these generous terms AMCON paid an average of only 24.27% of the value of margin loans purchased. Without the premium AMCON would have purchased the loans at 15.17% of their book value. This actually would suggest that the Management of ICB did get a reasonably fair deal for the bank in these circumstances. The best construction we can place on Mr Akingbola’s petition is that he is complaining that the Management that succeeded him could have done a better job of cleaning up the mess he created and left behind.

ix. As for Akingbola’s allegation of fraud, conspiracy, forgery and stealing against Dr. Saraki in connection with Joy Petroleum Ltd, the Central Bank was in the process of collaborating with law enforcement agents involved in the investigations when we received a copy of a letter written by the Honourable Attorney-General and Minister of Justice declaring that these allegations were unfounded and there was no basis in law for any criminal investigation in respect thereof. See Annexure HH. The Central Bank therefore cannot be held in any manner responsible for this decision as this was a position taken by the nation’s chief law officer.

36. Conclusion

i. It is now clear that each of the allegations made by the FRCN in the Briefing Note could easily have been resolved upon a simple request to the CBN for clarification or a little more careful review. There is no doubt that if the CBN had received the Briefing Note, which was prepared in June 2013, all the misconceptions, misrepresentations and erroneous inferencescontained therein would have been cleared, and the misleading of His Excellency would have been avoided.

ii. It is now my sincere hope that, having painstakingly provided detailed explanations, backed by verifiable documents, His Excellency, Mr President will find the response satisfactory, and in line with his adherence to fairness and justice, revisit and redress the issue of my suspension.

iii. Furthermore, it is my wish that His Excellency, Mr President, will apply the same rationale and rigour to other agencies of the Federal Government that have had serious allegations and queries levied against them, and presume upon them to provide responses and explanations with the same level of clarity and transparency.

iv. In closing, I would like to place on record the dogged professionalism and patriotism of the staff of the CBN. They have, over the years, served this country creditably, loyally and diligently.

I hereby restate my enduring passion for, and commitment to, our great country Nigeria.

Signed:

Sanusi Lamido Sanusi, CON

Governor, Central Bank of Nigeria

•We’d appeal ‘poor’ judgment, says counsel

A State High Court sitting in Osogbo, capital of Osun State, has awarded N2.55 billion against Skye Bank Plc as damage for breach of contract with Tuns farms Agricultural Limited, a subsidiary of Tuns Holdings.

The presiding judge, Justice Oyejide Falola, in his ruling last Friday, stated that the management of Skye Bank Plc failed to fulfill a contractual agreement it entered into on a loan facility of N2 billion with the firm.

The judge ruled that the bank exhibited poor corporate governance and diligence in handling the Central Bank of Nigeria (CBN) loan paid into the account of Skye Bank Plc for disbursement to its customer.

The firm had dragged an Osogbo branch of the Skye Bank Plc before the court for disbursing the sum of N300 million out of the N2 billion loan it secured from CBN under a special loan facility called Commercial Agric Credit Scheme.

The plaintiff (Tuns Farm) said all efforts for the bank to release the balance of N1.7 billion failed.

The bank, it alleged, claimed to have used the balance to offset a loan previously obtained by the firm.

The plaintiff insisted that the previous loan had been taken over by the Asset Management Company of Nigeria (AMCON.)

Counsel to the plaintiff, Chief Duro Adeleye SAN, said the ruling upheld justice and fairness in the case.

He said that the judgment would restore the confidence of Nigerians in the judiciary.

Adeleye also urged the court to mandate the bank to pay the damage to his client soonest.

But counsel to the defendant, Mr. Oladipo Olasope, said his client would appeal the judgment.

He described the ruling as poor, stating it negates the principle of law.

Olasope said: “I have made it clear that we will appeal against the judgment. Payment of such damages will definitely kill the bank. The judgment did not follow the general principle of law”.