The Nation Newspaper

Tag: Sanusi Lamido Sanusi

  • Illegalities in NNPC, by CBN Governor Sanusi

    Illegalities in NNPC, by CBN Governor Sanusi

    Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi appeared yesterday at the Senate’s Investigative Public Hearing on Unremitted Oil Revenue. He gave details of his grouse about the accounting system of the Nigerian National Petroleum Corporation (NNPC).

    I Am pleased to stand before you and present a summary of my latest submission on this subject. The submission itself is about 20 pages long with 30 Appendices, providing documentary backing for all material statements. The background to this session remains my letter to the President in which I indicated that there was a difference between the value of crude lifted by NNPC between January 2012 and July 2013 and the amount of foreign exchange repatriated into the Federation Account. This difference was placed at almost $50 billion and I respectfully advised the President to order an investigation into a number of areas I suspected were responsible for leakages in oil revenue.

    My letter was, sadly, leaked and published in a highly politically-charged atmosphere. The Central Bank was practically accused of involvement in politics and in December it was clear to me that no tempered and positive discussion would take place. In order to calm nerves and avert major crisis I agreed to a joint press conference with Finance Ministry, the Petroleum Ministry and also to present a common front at the National Assembly.

    Since December, however, there has been an orchestrated campaign aimed at undermining our credibility and misleading Nigerians into believing that all monies due to the Federation Account have been either remitted or accounted for. I am, therefore, compelled to present to this committee detailed evidence that NNPC has in violation of the law and constitution been diverting money from the Federation Account, and involving itself in activities that warrant full investigation for more serious violations of the law.

    I have established, in my presentation, the following:

    1. That NNPC, in paying what it calls kerosene subsidy, is confessing to a number of serious infractions. First, I have shown, based on NBS data, that kerosene is not a subsidised product, and, therefore, the so-called subsidy is rent generated for the benefit of those in the kerosene business. Second, I have produced evidence that President Yar’Adua had issued a presidential directive eliminating this subsidy payment as from July, 2009. Third, these huge losses inflicted on the Federation Account have not been appropriated.

    The burden of proof on NNPC is to show where they obtained authorisation to purchase kerosene at N150/litre from Federation Funds and sell at about N40/litre, knowing fully well that this product sells in the market at N170-N220/litre. At what point was the presidential directive revered? NPA records would suggest that NNPC imports about 4-6 vessels of kerosene a month. Industry sources place the value of each vessel at $30m and the amount of “subsidy” per vessel at $20m. This means, at an average of 5 vessels a month, the Federation Account loses $100m every month to this racket.

    2. I have also shown, in my submission, that claims by NNPC of spending the money on PMS subsidy are not credible. I have submitted proof that as from April, 2012, NNPC has consistently rendered returns to FAC indicating that it made no deduction for subsidy. This is after rendering returns on amount deducted monthly for 20 consecutive months to March, 2012. NNPC had previously explained that it had stopped deductions from 2011 and that the N180b taken in Q1:2012 related to fuel imports for Q4:2011. As from 2012, the directive was for NNPC to submit its papers to PPPRA, the relevant government agency set up and given the responsibility for verifying and paying subsidy claims. Having officially reported that it was not making deduction for fuel in 2012 and 2013, it is surprising that the GMD and GED of NNPC would now claim that $8.49b was used to pay for subsidy.

    I am convinced that a major source of revenue leakage from the system is NNPC’s unverified claims for subsidy and unilateral deduction from the Federation Account. If we take the PPPRA template, subsidy/litre of PMS is about 1,136litre/MT, the subsidy is around N1.5b. This means that for every $1b claimed by NNPC as subsidy deduction, the corporation is claiming to have imported at least 100 vessels of PMS. In addition to the N180b reported in Q1:2011, NNPC had deducted N845 billion in 2011. According to the Farouk Lawan report, NNPC deduction for PMS subsidy in 2011 alone amounted to N1.7 trillion, if we add claims on Excess crude naira account. Any serious investigation into these matters will require an audit of NNPC’s database which it is statutorily required to keep based on subsidy guidelines. Only verification of the legitimacy of these claims can form the basis for a true reconciliation.

    3. Based on NNPC’s disclosure to the effect that it shipped $6b worth of crude oil on behalf of NPDC, I have argued here that at least a part of this amount is due to the Federation Account. This part relates to oil produced from blocks operated under “Strategic Alliance Agreement”. I have given you three legal opinions that unanimously argue that these agreements merely serve to transfer revenue due to the Federation to private hands. I have also shown how, based on these arguments, NNPC has effectively given tax relief and concessions to its business partners.

    Also customs duties and levies are treated as “development costs” and recouped from “cost oil” and “cost gas”. These companies recover OPEX and COPEX from production, take 20-70 per cent of the profit and pay no tax, on JVs in which the Federation was previously entitled to 55 per cent of the entire profit oil when Shell was the operator. I have given details of these transactions and my concerns in the paper.

    4. Although the above 3 areas exhaust the areas covered in NNPC’s explanations, I have also taken time to submit my analysis of the crude-for-refined-product swap contracts entered into by PPMC. This is because a significant part of the domestic crude taken by NNPC is in these transactions. I have indicated where i believe we are losing money in these transactions.

     

    Reconciliation

     

    Having thus explained my major opinions on NNPC‘s explanations, I will come to the reconciliation.

    NNPC itself has submitted that it lifted $67b worth of Crude between January 2012 and July 2013. Of this, we have been able to agree that the following amounts have been remitted to the Federation Account:

    1. $14 billion as equity crude

    2. $15 billion as payment to FIRS by IOCs. They paid in crude which was lifted by NNPC on behalf of FIRS. There was nothing in our records linking the two transactions.

    3. $2 billion Royalty payment to DPR by IOCs under similar arrangements as in (2) above.

    4. $16 billion out of the 428b taken as Domestic Crude Paid in Naira, not dollar.

    The following items are outstanding and need to be proven by NNPC:

    1. $12 billion out of domestic crude sales yet to be remitted. NNPC has already disclosed N180 billion as subsidy payment in Q1.2012. If PPPRA confirms this number, we will adjust the balance accordingly. As for the balance of $10.8 billion, NNPC has publicly disclosed that 80 per cent applied to petrol and kerosene subsidy. We have already explained why this explanation is untenable and NNPC needs to provide the relevant proofs.

    2. $6 billion shipped on behalf of NNPC. We have explained why some this belongs to the Federation and the need to investigate and audit the SAAS to recover amounts unconstitutionally diverted.

    3. $2 billion “third-party” financing” we have not been given any documents explaining or proving this along with other claims around pipeline repairs, maintenance, strategic reserves etc.

    There was no appropriation for these expenses and NNPC also needs to substantiate them.

    In summary, it is established that of the $67 billion crude shipped by NNPC between January 2012 and July 2013, $47 billion was remitted to the Federation Account. It is now up to NNPC, given all the issues raised, to produce the proof that the $20billion unremitted either did not belong to the Federation or was legally and constitutionally spent. There is no dispute that $20 billion out of $67 billion has not been paid into any account with the CBN.

    Our recommendation remains that this matter requires thorough independent investigation, as simple explanation will not suffice.

    I concluded my submission with recommendation for the future, to protect the economy from these unsustainable losses.

    I would like to make the following recommendations going forward:

     

    Recommendations

     

    NNPC should stop collecting 440,000bbl daily as “Domestic Crude”. The amount of crude should be reduced to the refining capacity of its refineries based on a signed refining contract that clearly states what products are to be delivered for each barrel. Sale proceeds net of recognised processing costs are to go to the Federation Account;

    All Crude for Product Swaps should be terminated and crude should be exported and sold at market price.

    Where NNPC needs to generate cash flow to fund PMS imports, it can “borrow” crude, on the approval of the Finance Minister, for 90 – 120 days. This crude is to be valued at the ruling market price. NNPC may sell the crude, import PMS and sell through its outlets. It should claim subsidy from PPPRA like every other marketer and present all required documents. Thereafter, NNPC should pay back the full value of crude lifted to the Federation Account and retain the profit. Where NNPC delays payment, the amount outstanding should attract interest at commercial rates until payment.

    All the SAAs entered into by NPDC should be investigated for constitutionality. The production numbers, Opex and Capex, and profit shares should be audited. The tax arrangements entered into with these parties should be reviewed and all revenues due to the Federation collected. If possible the SAAs should be terminated. Certainly, NNPC should be prohibited from entering into any SAAs in the future.

    NNPC to account for subsidies claimed in 2010-13 by producing documentary proof of legitimacy.

    As for what action needs to be taken on what has happened in the past, we express no opinion. The decision on what to do in this case rests entirely with the Government. My task is limited to raising an alarm over what I think is a development that is harmful to the economy, and establishing that the alarm was neither spurious nor baseless. I still insist that an investigation is needed to establish the extent of the losses and the nature of offence committed.

    I believe I have placed enough information before this committee to make the point. The amount in 19 months may be $12 billion or $19 billion or $21 billion, we do not know at this point but if we extend the period the amount will increase anyway, since this has been going on for a long time. The first priority is to stop it. It is unsustainable, and it will ultimately, if not stopped, bring the entire economy to its knees.

     

     

  • Okonjo-Iweala, NNPC and $10.8bn

    Okonjo-Iweala, NNPC and $10.8bn

    SPEAKING at a reception held in her honour last week in Lagos, the Minister of Finance, Ngozi Okonjo-Iweala, argued that it might be necessary for the Nigerian National Petroleum Corporation (NNPC) to show proof it spent the unremitted $10.8bn on key operational matters. The services of auditors could be required, the minister added. It will be recalled that the CBN governor, Sanusi Lamido Sanusi, had alleged that the NNPC could not account for over $48bn it ought to have remitted to the Federation Account. It was after a controversial reconciliation of accounts that the amount was whittled down to $10.8bn.

    Dr Okonjo-Iweala talked of the NNPC showing proof of how the money was spent. That clearly is not enough, no matter what she, the Minister of Petroleum Resources and the presidency think. What the Minister of Petroleum and the NNPC must show is why they spent that controversial $10.8bn at all. In answering why, they should let the public understand just how powerful they had become to capriciously spend money anyhow without appropriation. In a well-run country with bold and competent legislature, it is hard to see the NNPC and the Petroleum minister get away with that offensive and unacceptable behavior, even if they show how the money was spent.

  • Reserve depeletion worries CBN

    Reserve depeletion worries CBN

    The Central Bank of Nigeria (CBN) has warned that continued depletion of the Excess Crude Account (ECA) and the Foreign Reserve will leave politicians with no money to prosecute their electoral agenda.

    Addressing reporters at the end of the Monetary Policy Committee (MPC) in Abuja yesterday, CBN Governor Sanusi Lamido Sanusi noted that as elections approach in 2015, “one of the good things about not having a lot of money in the Excess Crude Account is that there isn’t enough ammunition to spend even if you want to spend”.

    This, he said (sarcastically), is good from a monetary policy perspective “but there isn’t too much fiscal fire power available to spend and that is helpful”.

    But Sanusi advised against further depletion of both the ECA and Foreign Reserve stressing that “if we continue having a reversal in inflow and pressure on exchange rate and we don’t have our savings, then ultimately even our (CBN) commitment to exchange rate stability cannot be effective”.

    On the depletion of fiscal buffers (ECA and Foreign Reserve), Sanusi “decried the continuous fall in revenue from oil despite stable price of oil and production in 2013.”

    Sanusi said: “It is a fiscal issue, not a monetary issue. We all have to face the reality. We had about $11 billion in Excess Crude Savings at the beginning of 2013 and we had less than $2.5 billion at the end of 2013. I suppose there are ongoing discussions with the Minister of Finance to review some of the reasons for that.”

    Though the committee acknowledged output losses due to theft and vandalism, this the MPC said “could not wholly explain the magnitude of the shortfall in revenue.”

    “As a consequence, accretion to external reserves remained low while much of the pervious savings have been depleted, thereby undermining the ability of the Central Bank to sustain exchange rate stability.”

    The MPC, therefore, urged the fiscal authorities to block revenue leakages and rebuild fiscal savings needed to sustain confidence and preserve the value of the naira.

    Giving details of the extent if depletion of the ECA and the external reserve, Sanusi stated that “gross external reserves as at December 31, 2013 stood at US$42.85 billion, representing a decrease of US$0.98 billion or 2.23 per cent, compared with US$43.83 billion at end – December 2012. The committee noted that the decrease in the reserves level resulted largely from a slowdown in portfolio and FDI flows in Q4 2013 resulting in increased funding of the foreign exchange market by the CBN to stabilise the currency.”

    The committee again expressed concern over the continued depletion of the excess Crude Account (ECA) which balance stood at less than US$2.5 billion on January 17, 2014, compared with about US$11.5 billion in December 2012. This absence of fiscal buffers, Sanusi said, “increased our reliance on portfolio flows thus, constituting the principle risk to exchange rate stability, especially with uncertainties around capital flows and oil price”.

    As the inflow begins to slow down, the government, Sanusi noted, needs “to be able to retain our own revenue. We need to be able to stop the theft, stop the vandalism, stop the leakages and basically save our own money in order to build up reserves because oil prices are at an average of $110 and the gap between 2012 and 2013 was less than $2.”

    The CBN governor lamented that “there was absolutely no reason why oil revenue should have collapsed from $8 billion to less than $2.5 billion in one year. So they need to tighten their (fiscal authorities) control. They need to check where the money is going. If we can do that, it is within our control that is really the biggest irony here. This is not the case of the crisis we faced between 2008 and 2009; this is really an internal thing. It is theft in the Niger Delta, it is leakages in resources; they are all issues within our control as a country. It is a good place to be, where you can actually take charge of the situation. So it should be top on the fiscal priority.”

    As for tightening, the Central Bank, Sanusi said “should continue tightening for as long as the challenges require. If the foreign reserves accretion improves, governance improves, that would be easier for us to continue to maintain stability.”

    He was concerned when he said “if we don’t have our own savings and we have to rely on trading portfolio inflow, it could happen in my tenure, it could be after; this is January, we will see what happens in March and in May, if we need to tighten we will and if we need to remain where we are we will remain. It is not just very likely that we are going to see any kind of accommodation in the year before an election.”

    On the monetary side, at the end of MPC meeting, all members voted for an increase in CRR on public sector deposits from 50 per cent to 75 per cent with effect from February 4, 2014.

    It was also decided that MPR should remain at 12 per cent +/-200 basis points and liquidity ratio (LR) at 30 per cent; Private sector CRR was retained at 12 per cent and the CBN was advised to take immediate steps to redress the supply- demand imbalance in the BDC segment while maintaing its focus on anti-money laundering (AML) activities.

    With regards to foreign exchange developments in the economy, Sanusi stated that “the end-period exchange rate remained stable at the w/rDAS and interbank segments but depreciated significantly at the BDC segment. The exchange rate at the w/rDAS-SPT in 2013 opened at N157.33/US$ (including 1 per cent commission) and closed at N157.26/US$, representing an appreciation of N0.07k or 0.04 per cent. The inter-bank selling rate opened at N156.25/US$ and closed at N159.90/US$, representing a depreciation of N3.65k or 2.34 per cent for the period. However, at the BDC segment of the foreign exchange market,the selling rate opened at N159.50/US$ and closed at N172.00/US$, representing a depreciation of N12.50k or 7.84 per cent.”

    Giving these developments, Sanusi said, “it is clear that the RDAS is not a window for politicians to buy dollars. About the issue of politicians, I have very high regards for them, I will not make any comment about that.”

    The Committee’s considerations were that the MPC welcomed the sustained stability of the exchange rate and single digit inflation in 2013. It however, identified four key concerns for policy in the short-to medium-term these include: depletion of fiscal buffers following the continuing decline in oil revenue, rundown of reserves and depletion excess crude oil savings; falling portfolio and FDI inflows; widening gap between the official and the BDC exchange rates; and Creeping increase in core inflation.

    The MPC also noted the reduction in portfolio inflows driven by the commencement of the Quantitative Easing (QE3) tapering by the Fed, transition concerns at the CBN and continued depletion of the ECA, thus dampening investor confidence.

    The reduction of the US stimulus, especially, could in addition, trigger capital flow reversals and put greater pressure on the naira exchange rate. The committee then expressed concern about the widening gap between the official and the BDC exchange rates,noting that this could precipitate speculation and round-tripping. “Though, the BDC’s represent a small component of the foreign exchange market,the widening spread appeared to have fed into creeping increases in core inflation” Sanusi said.

    The committee re-affirmed it’s commitment to a stable exchange rate regime while urging the fiscal authority to provide support by reducing fiscal leakages, improving controls around oil revenues and reviewing terms around production sharing agreements with oil companies,while awaiting the passage of the Petroleum Industry Bill (PIB).

     

  • Stop harassing Sanusi, Kwankwaso warns Presidency

    Stop harassing Sanusi, Kwankwaso warns Presidency

    Governor Rabi’u Kwankwaso of Kano State yesterday told the presidency to desist forthwith from harassing and embarrassing the governor of the Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi, over the alleged NNPC’s missing $10.8 billion.

    Mallam Sanusi is a Kano prince.

    The Kano governor said Sanusi does not deserve the embarrassment he is being subjected to by the federal authorities following the posers he raised over the $10 billion made for the country by the NNPC.

    Kwankwaso, at an interactive session with journalists in Kano yesterday, vowed that his administration would never forsake Sanusi or deny him the protection he requires.

    “The villa should understand that the CBN governor is not only the son of Kano but also an important pillar and a major contributor to the survival of Nigeria’s economy.”

    He said the CBN governor has always stood by the truth in the performance of his duties, hence the numerous achievements in the banking sector during his tenure.

    He added: “I hope they realise that the CBN governor is not an ordinary citizen and I hope that they also take note of that. And also let me say that we are very proud of him. He is somebody who is upright, somebody who is willing to say it as it is, anywhere and at any time and not minding whose ox is gored.

    “Let me tell them that we have seen nothing wrong. Anyone who advises leaders should check these figures, so as to confirm whether these figures are correct. Such people that make such statements should not be treated as enemies but should rather be embraced as friends. Let me assure the CBN governor that we are very proud of him and will continue to give him all the support and protection, where necessary.’’

  • GEJ vs. SLS!

    GEJ vs. SLS!

    By now, Nigerians must be sufficiently alarmed at latest turn in events over the ‘missing’ $49 billion. By this, I do not mean the frenetic pace of book reconciliation said to have brought the figure to $10.8 billion, or even the more shocking attempt by the Nigerian National Petroleum Corporation (NNPC) to pass off the $10.8 billion as routine “expenses”. Rather, I am talking of the reported altercation between President Goodluck Jonathan and the rambunctious Central Bank of Nigeria Governor, Sanusi Lamido Sanusi.

    The story is that the President ordered – on phone – the CBN governor to hand in his letter of resignation. The latter, who had all along indicated his intention to proceed on his terminal leave effective March, had, according to the reports yet to be denied by the authorities, pointedly told the President that he would not be stampeded out of office. As if to give flesh to the story, the CBN governor would later be reported as convoking a ‘family meeting’ where he told his staff that he would now be staying put until the very last day of his term – in June!

    Understandably, opinions would remain divided over the question of whether Sanusi’s continuing stay in the office was still tenable in the aftermath of the finding by the reconciliation team that the ‘missing’ money was nowhere the $49 billion claimed in Sanusi’s September letter. Now, I have also heard that the letter was actually leaked to embarrass the President. The argument of course continues to go forth and backwards on the propriety of the government banker ‘squealing’ on the same government.

    Let me state that these are unusual times. It requires extraordinary times for the government’s top banker to write to the President alleging a whopping discrepancy of nearly $50 billion in the nation’s finances without the benefit of a formal acknowledgement of the latter for nearly the whole of three months. And more extraordinarily – we have since found out that the top banker didn’t even get his sums right before putting pen to paper on a subject that should ordinarily be within his remit!

    More intriguingly, now that the letter marked – KIV by the President– has now become the hot potato in street corners, the President appears to have resolved to kick the butt of the inveterate squealer – as against those of the outrageously inept, figure-juggling gate-keepers in the NNPC!

    No doubt, there is a tribe out there who would swear that Sanusi was disrespectful to the person and the office of the President. To this tribe, I guess it’s no use seeking to persuade them – or anyone for that matter – to be sober in their appraisal of the situation; not now after what is perceived to be Sanusi’s latest insolence against the person of the President. I guess its part of the notion of the Nigerian Presidency as the most powerful one on the face of the earth – something I describe as the Kabiyesi syndrome. It sums up to the notion of an all-knowing, unchallengeable institution, an illusion that continues to be sold and bought by many Nigerians.

    In this, I was drawn to re-read the typically illuminating piece by my brother and colleague, Segun Ayobolu with the title Transformational Power of the Nigerian presidency published December 28 last year. Although the subject was on the potentially transformative power of the office when properly deployed; he drew clear examples from the nation’s recent experience to illustrate how it has often been deployed more like a force for evil – rather than good. Today, when Nigerians talk about the power of the number one office, they hardly ever do so in the sense of the intendments of the constitution but in the context of wilting institutions or what is now the penchant by the incumbent to press state institutions in the service of ignoble causes. Yet, it is to the credit of the framers of the nation’s constitution that they actually inserted enough safeguards to guard against arbitrary use of power and to ensure that actors play by the rules.

    Much as the President’s ego may have been ruffled by the Sanusi indiscretion, he and his advisers ought to know that he cannot remove the CBN governor by executive fiat. I don’t think there is any dispute as to where the ultimate power resides. The CBN Act is explicit enough. Section 11(2)9F): “A person shall not remain a Governor, Deputy Governor or Director of the Bank if he is removed by the President – provided that the removal of the Governor shall be supported by two-thirds majority of the Senate praying that he be so removed”.

    Now, the danger of the misadventure of the past week is that the aura and authority of the office may have been damaged irreparably. More worrisome is that the two outsized egos would not give up until one side is thoroughly vanquished. And just when you begin to wonder what the whole fuss is about, you are reminded that it is not about getting people to account for the $10.8 billion which the creative fellows in the NNPC insist we pass to their imprest account, or the needed overhaul of the shambolic public finance system under which a corporation does as it pleases with the commonwealth.

    No; it’s as simple as GEJ vs. SLS!

    Where do we go from here? If you ask me, I’ll just say that the President blew the chance big time. Sanusi’s suspension – an extra-constitutional step by the way – may please the presidency’s hounds so ready to draw blood. May we also remind them there is something described as the rule of unanticipated behaviour in power relations? How about stoking a fire you can never accurately predict the extent of its conflagration?

    Have I canonised Saint Sanusi? Far from it. If you ask me, I think the whole thing smacks of disorderly conduct on his part. Why would the man not disappear after the extravagant goof if not for the mortal sin of impudence? So, he does not want to be disgraced from office? Since when did hubris become a badge of honour? And where is honour here: staying put when you are clearly unwanted? Since when did Sanusi begin to worry about his legacy of double standards? Is it now that his hypocritical posturing is being laid bare as his exit nears?

  • Jonathan vs Sanusi: Stakeholders urge caution

    Jonathan vs Sanusi: Stakeholders urge caution

    The letter from the Central Bank Governor (CBN), Sanusi Lamido Sanusi alleging that $49.8 billion was not remitted by Nigerian National Petroleum Corporation (NNPC) to the Federation Account raised dust last week. President Goodluck Jonathan’s advice that Sanusi should resign for allegedly leaking the document to former President Olusegun Obasanjo, has met with varied reactions, with stakeholders calling for truce, reports COLLINS NWEZE.

    Unprecedented. That was the simple interpretation a senior banker gave to President Goodluck Jonathan’s advice to the Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi to resign.

    Jonathan had accused Sanusi of leaking a letter on the supposed non-remittance of $49.8 billion by the Nigerian National Petroleum Corporation (NNPC) to the Federation Account to former President Olusegun Obasanjo. This formed part of the kernel of a scathing letter Obasanjo wrote to Jonathan.

    While denying the allegation, Sanusi was quoted to have rejected the President’s advice, arguing, quite rightly, that it would take the Senate’s two-thirds to sack him. Expectedly, the development has elicited varied reactions from across the divide.

    Many who spoke on the issue have called for caution on the part of the President in the interest of the economy. They said it was left for Sanusi to either take the advice or leave it, adding that the President lacks the power to kick him out.

    They referred to Section 11 Sub-section (2) (f) of the CBN Act of 2007, which stipulates that the CBN Governor cannot be removed by mere pronouncement of a president. The section gave the conditions under which the Governor can be removed, such as the Governor being convicted by a court; where he is declared bankrupt, or by the President after securing the backing of two-thirds majority of the Senate. “A person shall not remain a Governor, Deputy Governor or Director of the Bank if he is removed by the President: Provided that the removal of the Governor shall be supported by two-thirds majority of the Senate praying that he be so removed.”

    Chukwuemeka Eze, Lead Counsel, Eze & Associates, said President Jonathan is aware that Sanusi cannot be removed by mere advice. “The President cannot remove him and he knows. That is why he advised him to resign, and mind you, resignation is a voluntary act. The Governor can take the advice or decline. If the Governor says he is not leaving, there is no law that can remove him. Legally speaking, Sanusi’s tenure is sealed till June 2.”

    Eze said the best bet is to allow him serve out his tenure because the heat that will be generated by a continued debate on the matter would be more injurious to the economy than forcing him to go.

    However, Eze said based on the sensitive nature of his position in the economy, Sanusi should have, firstly, written the NNPC to reconcile the figures. If the NNPC failed to give him the needed response, then, he could notify the President.

    Ekene Odum, Senior Lecturer, Labour Law at the Lagos State University (LASU), said the CBN Governor was appointed by the President, and this takes effect after the Senate confirmation. “The President cannot just wake up and say Sanusi should go. The President can suspend him. He can be disciplined, but can’t be removed without the concur of the Senate,” he said.

    He admitted that as the Chief Economist of the Federation, the leaked letter was a major embarrassment, adding that the Governor was too hasty to write the President. “Such writing has the capacity to cause confusion in both the local and international markets. Still, it would have made Sanusi a hero were the figures gotten totally right. But he made a statement only the brave could make,” he said.

    He continued: “If it is confirmed that the President asked him to go, it will be an unfortunate scenario that could heat up the polity and economy. Remember that $49.8 billion is different from $10 billion. Still, $10 billion is a huge amount of money.”

    He said despite the stalemate, the President should allow him to do his job and not push him out of office, having performed creditably at the CBN.

    “It is human to err, but that should not take away his glory. Until he leaves, he still has the right to advise the President on economic matters, but whether such advice will be taken or not remains a different matter entirely. The President has technocrats that can advise him on economic matters, but to stampede or disgrace him out of office is not right,” he explained.

    Odum insisted that it was only during the military era that a sitting CBN Governor could be forced out of office, adding that there has never been any such precedence in constitutional democracy. “During the military era, yes, he could be forced out. But in the era of constitutional democracy, it has never happened,” he said.

    However, Dr. Austin Nweze, Senior Lecturer, Lagos Business School, said even though some people are lauding Sanusi for a job well done, he has caused a lot of problems for the economy, saying the President’s order that he quits is in order and should be respected.

    He said Sanusi should have confirmed the right figures on NNPC remittances before writing the President, adding that such attribute is unbecoming of the Central Bank Governor, the fallout of which will be a minus for the economy. “It is definitely going to affect the economy negatively,” he said.

    He said the Governor discouraged banks from taking business risks, which has affected the lenders’ drive for businesses. “He is long-overdue. The President should have sacked him three years ago. There is urgent need to rectify the damages he has done to the economy. If he leaves now, he will be the first CBN Governor to be sacked. What the President has told him is that he does not have confidence in him,” he said.

    Bismarck Rewane, Managing Director, Financial Derivatives Company Limited, said the President may not have told Sanusi to resign. According to him, Sanusi’s position remains strategic to the economy and if the President wanted to advise him to resign, it won’t be on the pages of a newspaper. “I don’t think that the government can say so. Until I am convinced, I won’t comment on the matter. I doubt the authenticity of the letter. I need to observe before commenting,” he said.

    Ademola Areago, a Constitutional lawyer based in Lagos, said if Sanusi must go, such act will lead to all kinds of signals. Firstly, such act will create feelings of political and economic instability in the country. “The CBN is banker to the Federal Government and the CBN Governor is also the Economic Adviser to the President. Now, if he bothers to give advice at all, what type will he be giving?,” he asked.

    Sanusi has the key to the strong room and vault of the country and the way he leaves is important. “The whole world is watching because it has not happened in any country before. The way the information was handled was wrong. It raises the issue of confidence and investors both local and international are watching,” he said.

    He argued that the fact that the President made his intention to remove him public is enough damage to the economy. That, he said, means that he is working against the President’s will.

    “This type of situation is unprecedented. He is not asking him to go because of inefficiency. For now, Sanusi is hanging on to the law. It will not be easy at all because the statement will be sending all sorts of signals,” he said.

     

    Chairman, Nigeria Bar Association (NBA), Ikeja Branch, Monday Ubani, said the face-off portends great danger for the economy.

    He said Sanusi is in charge of the CBN’s vault and any altercation between him and the president is not healthy for the economy.

    Ubani said there is a breakdown of communication between President Jonathan and Sanusi, an indication that the apex bank’s helmsman may be frustrated about certain economic issues. “Sanusi does not want to be held accountable when something sinister happens to the economy. But President Jonathan must handle it with superior wisdom,” he said.

    The NBA boss agreed with Eze that Sanusi has the right not to resign because his position is tenured and must be allowed to run out. “Even if it is $1 billion that was found to be missing, there should be a ceasefire. President Jonathan should swallow his pride and allow the man to exhaust his tenure,” he said.

     

    The genesis of the problem

    The crisis started when Sanusi wrote the president alleging that $49.8 billion oil remittance that was supposed to have been paid by the Nigeria National Petroleum Corporation (NNPC) to the Federation Account was missing.

    This letter, it was alleged, drew the ire of the President Jonathan who directed Sanusi to resign for allegedly leaking his letter on the “missing $49.8billion” to ex-President Olusegun Obasanjo based on which the former president wrote a damning letter to him.

    The CBN governor allegedly denied any wrong doing, insisting that he would not be stampeded out of office. He insisted that it is only the Senate that could remove him and not a presidential fiat.

    It is believed that a statement by the CBN spokesman that the governor had told the workers that he would no longer proceed on a pre-retirement leave is a direct confirmation of Sanusi’s preparedness to stand on the point he made when he allegedly spoke with the president on phone. Presidency officials could not be reached for comments at the time of going to press.

     

    CBN reacts

    CBN spokesman Mr. Ugo Okoroafor has confirmed that Sanusi said he would no longer proceed on terminal leave at a “family meeting” with the bank’s staff. He spoke to reporters in Abuja on Sanusi’s tenure after a news conference on the execution of the bank’s Payment System Vision 2020 (PSV 2020) strategy.

     

     

    Implications for economy

    The implication of Sanusi’s forced resignation, analysts say, would be quite negative. First, a lot of foreign management partners will lose confidence in the management of the economy while the independence of the institutions that are part of the Central Bank and participating in economic management will equally be negatively affected.

    According to the Managing Director, SP&S Consulting, Debo Adebayo, reducing the power and independence of the CBN would send a signal of retrogression at a time others central banks are moving towards greater autonomy to enable them handle intricate financial crises.

    He said a strong economy anywhere is tied to the effectiveness of the conduct of its monetary policy. “You see, the monetary policy is a serious business; it could be very, very terrible to have a country where the monetary policy direction is doubtful. When a government subjects the conduct of monetary policy to political influence, you are not going to have a strong economy,” he explained.

    According to him, such development could hamper the effectiveness of monetary policy and the management of the macro-economic framework of the country. “The survival of the CBN is at the heart of the survival of the economy,”he warned.

     

    Swimming in controversial waters

    Appointed in the midst of 2009 debt crisis, Sanusi, 51, fired the chief executives of eight lenders within four months of taking office after an audit found evidence of mismanagement and reckless lending.

    His push for stability in the currency has helped bring inflation down to below eight per cent.

    But Sanusi’s actions have never strayed from controversy. He never stopped antagonising lawmakers by criticising their spending and courting controversy for his outspoken views, most recently on China’s role in Africa.

    In December 2010, lawmakers demanded his apology for saying a quarter of the government’s spending on overheads went to parliament and that was damaging for the economy. He refused, saying his estimates were correct.

    Again, two years ago, lawmakers attempted to whittle down the bank’s powers by proposing an amendment to CBN Act, hoping to strip him of his position as chairman of the bank’s board. They also pushed to include more external members on the board and have the National Assembly approve the bank’s budget.

    More recently, he criticised China’s role in Africa, saying it contributed to the “deindustrialisation and underdevelopment” in the world’s poorest continent. Africa must shake off its “romantic view of China” and see it as a competitor that’s “capable of the same forms of exploitation as the west,” Sanusi warned.

     

    CBN’s constitutional roles

    The CBN is empowered to maintain price stability and ensure a non-inflationary growth. It also has the responsibility to ensure a sound and stable financial system in addition to other developmental functions. These mandates and functions are peculiar to central banks across the world and no other institution plays such roles.

    These special responsibilities are enormous and have continued to pose increasing challenges to central banks largely because developments in the domestic and international economies create challenges in the financial systems and the art of central banking.

    Globalisation exemplified by economic and monetary unions has equally increased the challenges to central banking.

    Analysts insist that the effective discharge of these responsibilities requires that central banks be totally independent and shielded from political interferences.

     

    Sanusi’s successor

    According to Sanusi, whoever will be picked by President Jonathan to take over at the apex bank must be able to develop the market. “Central banking has changed. I think the market has developed. To be honest, if any Central Bank Governor misbehaves, the market punishes the economy immediately. So, the market is a major factor. Even as a governor, by the time your capital market crashes, and your currency goes down, you will know that it is either you restore stability, or you are out of the job. That’s important,” he said at a media conference held last month in Lagos.

    Analysts have tipped some of the CBN deputy governors among Sanusi’s likely successor. Deputy Governor, Operations, Tunde Lemo; Deputy Governor, Economic Policy, Sarah Alade; and Deputy Governor, Financial System Stability, Kingsley Moghalu have been mentioned. Also linked with the job are: Managing Director, Asset Management Corporation of Nigeria (AMCON), Mustafa Chike-Obi; Managing Director, FirstBank of Nigeria, Bisi Onasanya and Managing Director, Access Bank, Aigboje Aig-Imoukuede and recently, Minister of Trade and Investment, Olusegun Aganga.

    Analysts insist the next governor will probably have a different outlook or perspective, but one thing that is sure, remains that the fallout of the altercations between the President Jonathan and Sanusi may have just begun.

  • Three banks fail liquidity test

    Three banks fail liquidity test

    The liquidity stress test conducted on 23 banks by the Central Bank of Nigeria (CBN) at the end of June showed that three lenders have problems.

    The CBN Financial Stability Report released at the weekend was okayed by the CBN Governor, Sanusi Lamido Sanusi.

    It said the industry liquidity ratio declined to 16.7 and 13.3 per cent after the five-day and cumulative 30-day shocks were applied, from the pre-shock position of 67.8 per cent.

    The liquidity ratios of most banks were below the regulatory threshold of 30.0 per cent for the five-day and cumulative 30-day scenarios.

    Similarly, three banks recorded negative liquidity ratios, following the application of a cumulative 30-day shock. However, the overall banking industry was resilient to liquidity shocks, though a few banks were found to be vulnerable.

    According to the report, the pre-shock liquidity ratios for the banking industry, large, medium and small banks rose by 14.14, 19.47, 3.15 and 3.07 percentage points to 69.70, 70.22, 75.45 and 68.47 per cent, compared with that of end of December 2012.

    “The banking industry was resilient to credit risk as the impact of the most severe credit risk shock (200 per cent rise in non performing loans, NPLs) resulted in Capital Adequacy Ratios (CARs) of 11.99 per cent, which was 1.99 percentage points above the 10 per cent threshold,” it said.

    According to the report, the large and medium banks were less vulnerable to the most severe shock, as they maintained CARs of 13.58 and 11.35 per cent. However, the small banks’ CAR deteriorated to 2.39 from 18.33 per cent, requiring N96.03 billion to raise their CAR to 10 per cent. Under this scenario, 11 banks maintained CARs above 10 per cent, six banks had between five and 10 per cent, three banks had less than five per cent but greater than zero per cent and three others recorded negative CARs

    It said the banking industry and the three peer groupings showed significant levels of concentration risk as indicated by the level of capital deterioration. “If the credit facilities of the five biggest corporate obligors were to deteriorate from “doubtful” to “lost”, the CARs of the banking industry, large, medium and small banks would decline from 18.69, 18.86, 18.25 and 18.33 per cent to 7.34 the banking industry resulted in the liquidity ratio falling to 33.48 per cent, though above the threshold of 30 per cent from 69.70 per cent,” it said.

    Also, large banks followed the same trajectory as their liquidity ratio deteriorated to 30.27 per cent from 70.22 per cent.

    “The medium and small banks showed more resilience as their liquidity ratios were 37.50 per cent for the medium and 45.37 per cent. Under this scenario, only five banks would be able to maintain CARs equal to or above 10 per cent, while the remaining 18 would record less than 10 per cent CAR,” it said.

    It said liquidity risk was moderate as the impact of a 10 per cent general runs on for the small banks, from 75.45 and 68.47 per cent. However, all the categories remained above the 30 per cent benchmark. The banking industry and the three peered banks were, therefore, resilient to the liquidity shock at the level indicated.

    Sanusi said in a statement that the efforts of the regulatory and fiscal authorities in addressing the challenges of the global economic and financial crises to achieve higher growth and employment were evident in the first half of last year.

    He said the projected weaker global demand, slower growth in key emerging markets and slow recovery of the Eurozone would require the monetary authorities to sustain the implementation of monetary and macro-prudential policies to achieve financial system stability.

    “The economy recorded some impressive macroeconomic achievements in the first half of 2013 despite some challenges. In specific terms, the country recorded strong GDP growth, single digit inflation, exchange rate stability, capital market recovery and growth in external reserves. As well, it maintained a stable banking system.

    However, oil production was less than expected owing to supply disruptions. Also, the high proportion of foreign portfolio investments (FPIs) in the financial markets presented a potential risk in the event of sudden capital reversals,” he said.

  • The Stella Oduah conundrum

    The Stella Oduah conundrum

    ON his return from Jerusalem a few weeks ago, President Goodluck Jonathan was asked whether he had received the report of the panel he set up to look into the Stella Oduah scandal in the Aviation ministry, and what he intended to do with it. He struggled to hide his disdain for the question. He had received the report, he said curtly. He said nothing about what he intended to do with it. Like many reports on his table, so to speak, he has either not read them, or he intends to ignore them, or better still, let them mummify on his table.

    Recall that last September the president also received a letter from the Central Bank governor, Sanusi Lamido Sanusi, complaining about haphazard remittances from that most labyrinthine of Nigerian organisations, the NNPC. As he is wont, the president ignored the letter until it blew up in everybody’s face last December. Though Mallam Sanusi is the worse for wear over the letter, thus seeming to confirm President Jonathan’s tactic of ignoring a problem until it resolved itself or, better still, hurt his enemies, the Oduah report seems headed in that infamous direction.

    There is no other interpretation to give the president’s reluctance to tackle the Oduah scandal than to say he looks at ethics from a different prism from the one many world leaders are used to. He is probably angry that the scandal broke out in the first instance, and even more peeved that anyone is putting pressure on him to act. Why then did he bother to attend Mandela’s burial? To honour a man whose methods and principles his government stands in direct opposition to? Well, sooner or later, he will have to act, whether directly or through cabinet reshuffle, as some speculate. The controversy, no matter how angry he gets, will not go away until he buries that stubborn ghost.

  • Jonathan versus Sanusi: Who is advising the president?

    Jonathan versus Sanusi: Who is advising the president?

    The presidency has not denied reports that President Goodluck Jonathan wants the Central Bank of Nigeria (CBN) governor, Sanusi Lamido Sanusi, to resign. Perhaps they wait to see how the kite they are flying over the matter would soar before a statement is made denying or confirming the stance of the president. There is, however, no doubt that the presidency was unhappy that a letter written by the CBN governor alleging that the NNPC failed to remit over $48 billion to the federation account was leaked to the media. After reconciling accounts and suggesting that only about $10 billion remained creatively unaccounted for, the presidency is sanctimoniously gunning for the head of Mallam Sanusi. It is doubly strange that a presidency that permissively winked at the huge indiscretion of the Aviation minister, Stella Oduah, over the scandalous purchase of two bulletproof cars can ferociously pursue a CBN governor that waited for almost three months for the president to compel the NNPC to explain its clumsy bookkeeping.

    The Jonathan presidency is inoculated against logic, maturity and restraint. It has long appeared incapable of appreciating insults as it has been unable to understand how badly its officials, especially the president himself, damage the image and prestige of the presidency. It is still mired in the Ms Oduah scandal, and cannot extricate itself from the highly damaging impact of its misstep on the Justice Ayo Salami matter. Now it is plunging heedlessly into another self-created fray. If the president had immediately responded to the CBN governor’s September, 2013 letter and directed the NNPC and the Ministry of Finance to join Mallam Sanusi in resolving the matter, there would not have been a controversy, let alone a leaked letter. The Sanusi controversy is evidentially the creation of a slothful presidency.

    To worsen a very bad situation, the president is leaning on the CBN governor, who is due to retire in June, to quit immediately. Mallam Sanusi has of course not emerged from the letter controversy unscathed. In writing a misleading letter to the president, he had acted most impetuously. However the public rebuke he has received and the interminable snigger his arithmetical flight of fancy has elicited have unnerved everybody and affected the huge respect he has accumulated since he assumed office and made the CBN top post a very visible one. It is likely the president guessed Mallam Sanusi had lost the respect associated with that office, and believed he had become so vulnerable as to be unable to resist a sack. But against a presidency completely shorn of respect and gravitas, one that is now without a moral compass of any sort, not to talk of democratic or social values, Mallam Sanusi was always likely to receive fairer hearing and support, if not benefit of the doubt.

    The advisory unit of the Jonathan presidency and his entire cabinet are dismissed as third-rate. But even then, surely he could still have found a few among the uninspiring number to advise him against the misbegotten pursuit of the wounded CBN governor. From all indications, Dr Jonathan will end up appearing to persecute Mallam Sanusi. Neither he nor his cabinet, it is clear, had inspired anyone. Now, for a matter that should be left to resolve itself or die a natural death, this uninspiring government is set to make a bad situation worse and further rubbish the little prestige left in the Nigerian presidency. Indeed, if Mallam Sanusi does not heed the president’s advice to resign, it is inconceivable that Dr Jonathan can find the muscle to force him out, or secure the number in the fractured and dispirited Senate to unhorse him.

  • The limits of criticism

    The limits of criticism

    There is more to the scandalous exposure of the CBN Governor Sanusi Lamido Sanusi as a false whistle blower on the supposedly untidy accounting books of the nation’s petroleum sector than a section of the Nigerian Press wants us to believe.

    Ordinarily, the sensational letter from the CBN Governor to the President raising worrying issues indicating the diversion of earnings from the lucrative crude oil sales by the NNPC is a classical scoop that no newspaper will fail to publish under banner headlines. In this case both the message and the messenger combine to lend credence to the typical Nigerian hear-say and the added spice of a leaked letter could only have proved irresistible to even the most conservative of editors.

    So on the face of it, the media splash of screaming headlines and crusading editorials literally canonizing the CBN Governor for such a patriotic spilling of the beans and simultaneously bashing not just the NNPC but the entire Goodluck Jonathan Presidency, was to be expected.

    With the House Speaker’s blame game on corruption and former President Obasanjo’s hell-raising letter all hitting the headlines within a few days interval, it was indeed the opposition’s delight.

    However, the post-leakage euphoria was dramatically deflated when the Sanusi Lamido Sanusi, CBN Governor made a straight-faced admission of willful exaggeration and inexcusable negligence of official responsibility following the humiliating outcome of a rather belated reconciliation of accounts that provided damning evidence of the CBN Governor’s dishonest flippancy.

    By professional reckoning, the news value of the initial leaked letter from the CBN Governor was just as sensational as his self-indicting factual somersault before the Senate which confirmed not only that the CBN Governor misled the nation but that he did so in spite of having the facts of the matter right under his nose.

    The Press that was also clearly culpable, as the chosen weapon of mass deception by flagrant disregard of the ethics of news reporting, should have been more outraged by this fiasco than the initial “scoop” that never was. Instead, it was as if the news instincts of the editors had been suddenly turned off. Those that reported the CBN Governor’s gaffe at all tucked into inconspicuous portions of their reports, others callously stuck to the CBN Governor’s discredited whistle-blowing posturing.

    Such a bizarre twist in professional standards of news reporting and brazen adoption of bias and prejudice as hallmarks of journalism was most distasteful coming from leading newspapers that flaunt pious slogans of objectivity and fearlessness on their mastheads.

    For the avoidance of doubt, the Press deliberately played down the unpatriotic excesses of the CBN Governor who sought to out-do the political opposition in their tendency to smear and sleaze the incumbent President and government and all agencies of government more often than not, without justification.

    The incontestable fact is that the reconciliation process including the CBN Governor was satisfied that there was nothing like a 49.8 billion dollars of unremitted proceeds from crude oil sales diverted by the NNPC from the federation account. It was also confirmed that the CBN is in possession of the accounts into which the remittances were duly paid but ignored them for reasons yet to be explained by the CBN Governor.

    As if this attitude is not bad enough, weeks after the CBN Governor has himself expressed remorse over his indiscretions and the sensational press hullaballoo forced into acquiescence by the share weight of corrective information, some newspapers would still rehash discredited statements disowned by the author – the CBN Governor.

    Discerning Nigerians were aware that the 12 billion dollar figure was not only corrected to about 10.8 billion dollars by the Coordinating Minister of the Economy Ngozi Okonjo Iweala, but further clarified to represent the amount yet to be reconciled at the time of the briefing to the Senate Committee but certainly not “missing.” The needless controversy was CBN Governor’s tactless face-saving effort following his admission that his phantom figure of 49.8 Billion dollars was in fact a huge misinformation that the minister promptly debunked with convincing finality.

    The NNPC has declared that by the time the reconciliation process is completed, it will be established that the amount represents some of the responsibilities that it carries out on behalf of the federal government such as the unpaid subsidies on kerosene and premium motor spirit (PMS). Dr. Okonjo-Iweala was earlier reported to have stated that no subsidy on kerosene has been paid since she assumed office.

    It is also on record that since January 2012, NNPC has been importing a bulk of the PMS used in the country as most of the private oil marketing firms stopped importing the product. NNPC has successfully kept the nation well stocked with products, especially PMS, these past two years and the national budgets in the period did not capture subsidy to the corporation.

    Similarly, the NNPC is required to maintain huge petroleum products reserves in the national territorial waters as strategic reserves in the national interest and at the rate of 40 million litres of PMS national consumption per day, NNPC currently maintains 32 days’ sufficiency of products. The cost of pipeline vandalism and oil theft are security issues affecting over 5000 kilometers of pipelines across the country on which NNPC expends huge resources on pipeline protection and repairs, operational downtime and outright revenue loss from crude oil and product theft and willful spillage. All these make up the yet-to-be-reconciled balance of $10.8bn known to all the parties in the reconciliation process.

    With all this verified information in public circulation for weeks, it is incomprehensible that some newspapers will adamantly continue dishing out the falsehood. Sadly, there is little or no hope that the errant fringes of the Nigerian Press can be called to order in what is clearly a disservice to the citizenry. The wise citizens should therefore protect themselves from press freedom without responsibility henceforth.

    • Gwazuwang, a petroleum industry watcher wrote from Abuja.