The banking system is notorious for keeping worn-out and smelly banknotes. Poor monetary policy decisions and abuses by Central Bank of Nigeria (CBN) officials as seen in the ongoing N12billion currency scam trial involving 22 bankers are denting the regulator’s image, writes COLLINS NWEZE.
Edith Okafor, a consumer goods distributor based in Lagos is worried that for the past four years, what she has been paid with worn-out banknotes from her customers. Some of the notes are so bad that her customers kept rejecting them as balance after transactions. In some of the occasions, the customers threw the banknotes back at her, saying they needed cleaner notes.
Whenever Edith tried to reject the banknotes, the feedbacks from her customers are always the same: “I got this money from my bank or do you think I print money. Where do you want me to get cleaner notes?”
Perhaps, the customers are right. Finding new banknotes is like finding a needle in a hay sack. Not until last week, when an alleged N8 billion fraud broke out did many people understood why there are much worn-out bank notes in circulation.
Facing trial over what happened to the N8 billion are 22 bankers, including six from the Central Bank of Nigeria (CBN) and 16 others from commercial banks.
The CBN staff include: Patience Okoro Eye (Abuja), Afolabi Olufemi (Lagos), Kolawole Babalola (Ibadan), Olaniran Muniru Adeola (Ibadan), Fatai Yusuf Adekunle (Head, Security, CBN, (Ibadan) and Ilori Adekunle Sunday (Akure).
The suspects, the Economic and Financial Crimes Commission (EFCC) alleged, stole and recirculated defaced and mutilated currencies, worth N8 billion. They are being tried at the Federal High Court, sitting in Ibadan, the Oyo State capital.
The accused persons, according to the prosecution counsel, Mr. Rotimi Jacobs, instead of carrying out the statutory instruction to destroy the defaced currency notes as their duty demands, substituted the currency with newspapers neatly cut to naira sizes. The offence, as contained in a charge sheet read out to the accused persons is punishable under section 7(2) of the Bank Employees etc.(Declaration of Assets) Act, CAP. B1, Laws of the Federal Republic, Nigeria 2004.
Former President, Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, said he was not surprised at what the 22 bankers did because the ethics of the profession had gone down over the years.
He said: “Why is it that Nigerians are spending dead notes but when you go to parties, you see crispy notes? It is because of corruption and the calibre of people managing the economy. The CBN is supposed to be managing the economy and ensuring that clean notes are made available to the people, but the reverse is the case. That tells you we are in a jungle country.”
Unegbu said such unwholesome practices have made money management difficult.
The ex-CIBN chief said the N16 million had been injected into in circulation as against the N8 billion that would have been added if the suspects had kept faith with the ethics of their profession in the discharge of their duty.
According to him, every currency has a lifecycle which should be followed, and the expired notes must be destroyed, but the policy is being abused. He said the suspect needed the support of bank staff to reintroduce the cash into the system adding that such temptations should be resisted by bankers.
Unegbu said: “When I was in FirstBank, some fraudsters approached me to assist them circulate counterfeit currencies into the system. I was expected to mix the funds with genuine notes and circulate them into the market.
“But I refused because we were taught not do such things. I don’t know how many bankers will resist such temptation today.”
However, the scam never came as a surprise to Henry Boyo, who alleged that Nigerians take for granted even bigger fraud in the CBN.
The economist said: “It did not surprise me at all. It was expected. What is clear is that the CBN is fraught with fraud. Whether it is the intervention fund or monetary policy strategy, it is the more you look, the less you see,” he said.
Boyo described as questionable the practice that allows the CBN to carry out regular mopping up of excess liquidity from the system, alleging that the apex bank mops up over N6 trillion every year and that the one for the first quarter has already been conducted, with N1.5 trillion taken off the system. Commercial banks were paid 10 to 15 per cent interests, leaving them with about N600 billion profit margin.
Mr. Boyo alleged that the intervention funds, running into billions of naira, must also be investigated just like the Polymer notes scam.
But, Brown Okorie, another economist, said the mopping up of excess liquidity in the system is the statutory function of the CBN, saying it’s a mechanism to bring down inflation and stabilise the exchange rate.
Pointing out that the apex bank has several tools to control the inflation rate, he emphasised that the best option at the moment will be to reduce the excess liquidity in the system.
“The CBN will look at the indicators and decide what tools to use to control the inflation rate, which will all be aimed at reducing excess liquidity in the system,” Okorie said.
The Intergovernmental Action Group against Money Laundering in West Africa (GIABA) also reacted to the development. It said it has written to the CBN and the Economic and Financial Crimes Commission (EFCC) requesting to be updated on the scam.
Head, GIABA Office in Nigeria, Timothy Melaye, told The Nation that the alleged fraud has dented the CBN image and that of the country, which is a signatory to the Financial Action Task Force (FATF).
Melaye said: “Nigeria is a member of FATF and as a member, it should be above board in a matters regarding fraud, money laundering and illegitimate transactions.”
The FATF is the global standard setting body for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).
In its efforts to enforce greater compliance with acceptable international standards, the FATF, in collaboration with FATF Styled-Regional Bodies (FSRBs), undertake targeted review of countries/jurisdictions identified with strategic AML/CFT deficiencies with a view to protecting the international financial system from Money Laundering and Terrorist Financing (ML/TF) risks arising from such deficiencies.
The FATF had in October, 2013, removed Nigeria from the list of countries identified as jurisdictions with significant deficiencies in their AML/CFT regimes.
The global anti-money laundering body gave its countenance to Nigeria’s significant progress in improving its AML/CFT regime and noted that the country had established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF evaluators had identified previously.
Melaye called for more effective international cooperation, including exchange of information between competent authorities, conduct of joint investigations, tracing, freezing and confiscation of illegal assets.
Saying that GIABA has been supporting the EFCC in fight against corruption, he urged: “The EFCC is getting the needed support from GIABA and we want the Nigeria government to provide the necessary financial support for the body do carry out its work more efficiently.”
What experts are not sure yet, is whether the alleged fraud uncovered at the CBN will prompt the FATF to delist Nigeria from list of countries with AML/CFT compliant regimes.
Former Executive Director, BankPHB, Richard Obire, said as a regulator, the CBN should be above board when compared with banks’ adherence to ethical banking standards.
Obire said: “The CBN has to keep a responsible behaviour. If the accusations are established, it will be so unfortunate for the CBN. It is not something to expect at all from a banker, let alone the CBN. The apex bank needs to quickly restore the confidence of banks in their operations.”
According to him, besides the CBN being the custodian of banking integrity, it needs to come out and assure the public on what it stands for, by getting to the root of the crisis by reviewing its oversight functions on its employees.
Obire said the same severe sanctions should be extended to the six banks whose workers are allegedly involved in the scam.
“The banks need to take same steps because they are inexcusable,” he said.
The former bank director, said that by injecting N8 billion into the financial system, the alleged perpetrators had boosted money supply.
“And as an import-dependent country, the floating money will be driving up demand for forex, and weakening the naira. If it is not chasing forex, the fund will be targeting other goods, and raising inflation”.
He recalled that inflation has been on the rise since December last year, from seven per cent to 7.6 per cent in May.
At the last Monetary Policy Committee (MPC) meeting mid-May, CBN Governor Godwin Emefiele disclosed that the year-on-year headline inflation crept upwards for the fourth consecutive month in April 2015. The inflation rate rose from 8.2 per cent in January to 8.5 per cent in March and further to 8.7 per cent in April.
According to him, the increase in headline inflation in April reflected increases in both the core and food components. Core inflation rose to 7.7 per cent in April from 7.5 per cent in March, while food inflation increased to 9.5 per cent from 9.4 per cent over the same period.
The CBN chief noted that the uptick in inflationary pressures, year-to-date, was largely traceable to transient factors such as high demand for transportation, food and energy, especially in the period around the general elections as well as the Easter festivities. He also noted the roles played by system liquidity and the pass-through effects of the recent depreciation of the naira exchange rate.
Reiterating CBN’s commitment to price stability, Emefiele noted that given the already tight stance of monetary policy and the transient nature of the incubators of the current inflationary trend, which are outside the direct control of monetary policy, the space for maneuver remains constrained, necessitating the intervention of fiscal and structural policies to stimulate output growth.
Equally, broad money supply (M2) increased by 1.80 per cent in April, over December 2014 level. When annualised, M2 increased by 5.39 per cent, but it remained lower than the growth benchmark of 15.24 per cent for the year.
Both Obire and Unaegbu agree that the impact of the N8 billion cash fraud cannot be ruled out in driving inflation to its new heights. They believe that since the funds were reprinted and ploughed back into the system, the additional N8 billion fraud cash will bring the total cash to N16 billion, instead of approved N8 billion.
Within the banking industry, there have also been reactions to the alleged fraud, which has shaken the financial sector to its roots.
Head of Media at FirstBank Babatunde Lasaki said the transactions were done basically by CBN staff in collaboration with five employees in his bank.
He said two of the employees had been sacked while the remaining three are helping the EFCC on the ongoing investigation.
Lasaki said that it is after the true picture unfolds that the remaining staff if culpable may be dismissed.
Also speaking, Head, Corporate Communications, Wema Bank Plc, Onome Odili, said the affected workers in her bank had been sacked long ago. Like Lasaki, she said the fraud is a CBN show and that her bank officials were brought in to implement it.
An insider in Ecobank said the two affected officials left the bank, when they suspected that the crime had uncovered.
Another insider in Access Bank said the two officials of the bank are involved are legacy staff from the defunct Intercontinental Bank. The source said the CBN should be blamed because bad notes submitted for destruction are kept in long queues for years with no action taken on them, giving room for abuse by staff.
He said the banknotes would have been destroyed immediately and the fraud averted if the unit involved had been effective.
The source said that some of the notes marked for destruction were still pending, five years after with nothing done and thereby creating room for abuse.
Imma Okocha, a principal partner in Messrs Imma Okocha & Associates, said members of the public should demand for the real identity of the suspects.
He said: “Could they have acted alone, or there are other top CBN officials involved. Are they being used as sacrificial animals because they are lower cadre staff?
Okocha said the success of the case will depend on how well the evidence is gathered but believes that the police are likely to do a shoddy job.
“You will find out that some principal witnesses may decide not to come to court because of their relationship with the accused persons. The Police are tactically known for spoiling cases, especially, where those in investigation are not additionally taken care of by the complaining party,” he stated.
The lawyer said that until, further facts are released and people that took the case to court provide further evidence, otherwise the case may collapse.
He said: “The boldness of this type of crime, shocks me. There is no doubt that this type of crime have been going on for a long time. They should look at what has been happening because they already have facts.”
Okocha, however, admitted that an accused person, although knows he has committed the crime, do not necessarily need to plead guilty, but would want the prosecution to prove their case.
CBN’s Director, Corporate Communications, Ibrahim Mu’azu, relived the events that led the management of the apex bank to hand over the suspects to the EFCC for prosecution.
He said: “As soon as the bank’s internal investigations were concluded beyond reasonable doubt that some wrong doing had occurred, the affected members of staff who are middle-level officers were, depending on gravity of offence, either summarily dismissed or immediately placed on indefinite suspension on 21 October 2014, and all handed over to the EFCC for further investigation and prosecution.”
Continuing, he said the CBN has also conducted a nationwide audit of all 37 branches of the bank and found that this was an isolated scheme at its Ibadan branch.
He said the bank will continue to collaborate with the EFCC to ensure that affected CBN workers, as well as their accomplices in some commercial banks, is brought to justice.
Mu’azu said the scam was discovered during a routine internal audit of the bank’s cash destruction activities in September 2014.
He said the CBN Briquetting Panel, comprising of senior bank officials from the various branches, noticed some anomalies at the Ibadan branch and immediately reported this to the bank’s management.
He said that on further investigation ordered by Emefiele, it was discovered that a systematic scheme, which had been on for several years, was being run in which mutilated higher denomination notes, originally meant for destruction, were swapped with lower denomination currencies. This practice known as interleafing, basically labels a box with a higher value than its true content.
At the penultimate court hearings, it was discovered that the suspects acquired assets in Nigeria and Pretoria, South Africa.
The EFCC arraigned the suspects on a 28-count charge, bordering on forgery, misrepresentation and self-enrichment before Justice Adeyinka Faji.
In the charge, the EFFC said that the CBN staff conspired with the FirstBank employees to recycle the mutilated currency notes meant for destruction.
The accused, however, pleaded not guilty to the charge. The accused persons are facing a 15-count charge ranging from conspiracy, abuse of office and stealing to false declaration of actual amount.
The others have been accused of concealing of property, fraudulently acquiring assets in excess of their legitimate and provable income and causing economic adversity to the country.
The court was told how the suspects acquired assets worth several billions of naira through fraudulent means, in excess of their legitimate income.
The assets said to have been acquired were allegedly gotten by stealing N1.25 billion supposed mutilated currencies meant to be destroyed and taken out of circulation.
The EFCC told the court that one of the accused, persons, Mr. Ayodeji Alase, had N134 million in one of his bank accounts.
It (anti-graft agency) told the trial judge, Justice A.O. Faaji, that Alase, a primary six certificate holder, started work at First Bank as a guard before he was promoted to the position of a cash assistant.
The commission’s lead prosecution counsel (Jacob), a senior advocate, also told the court that the accused had property worth hundreds of millions of naira.
Alase, according to the anti-graft agency, has a duplex at Oluyole Estate in Ibadan, a shopping complex, a warehouse at Podo, a fenced plot at Dugbe, a block of four flats at Apeye, two plots of land and five-bedroom flat in other parts of the state capital.
He was alleged to have a credit balance of N132 million in one of his bank accounts. The commission also alleged that Alase possessed a block of five-bedroom flat at Apete area of Ibadan and a supermarket at New Garage, Apata area of Ibadan.
