•MD suspended as board orders forensic audit
• Court stops MD’s suspension
The Board of Directors of the Federal Housing Authority Mortgage Bank has appointed an independent firm to audit the bank’s books. It has also suspended the Managing Director, Mr. Roland Igbinoba, pending the outcome of the audit.
The board’s decision to suspend Igbinoba, according to sources, followed the report of a committee set up by the Management to look into the bank’s operations. The report revealed abuses in the bank, erosion of shareholders’funds, several operational and administrative malpractices, pointing out that these could be a threat to the bank if not properly handled.
In the build up to Igbinoba’s suspension, the Central Bank of Nigeria (CBN) had placed the FHA Mortgage Bank Limited, a subsidiary of the FHA, on “high risk” rating.
In its 2014 supervisory report on the mortgage bank, CBN described the bank’s composite risk rating as high and directed that an emergency board meeting be called in four weeks to discuss the issues.
The report noted that the loan disbursements were without approvals, adding that there were no limits for its various grades of services despite its board’s September 2014 credit recommendations.
The report also highlighted the granting of staff loans without documentation and non-implementation of effective internal control procedures to safeguard its assets and prevent fraud.
The Nation learnt that the measures were meant to protect the bank, FHA’s investment, and shield the institution from risks.
For instance, during the CBN-induced recapitalisation for mortgage banks, the FHA management was said to have handed over to its mortgage bank, assets in excess of N11 billion to facilitate the renewal of its licence by the CBN, and also ensure that it met the recapitalisation towards the issuance of a national license for the institution.
The assets, in form of landed properties, were developed plots in the following estates: a 40 units FHA Estate at Apo, Abuja; FHA Estate at Gonin Gora, Kaduna Town, Kaduna State; FHA Estate at Odukpani, near Calabar, Cross River State; FHA Estate at Abesan, Lagos State; FHA Estate at Gombe, Gombe State; FHA Estate at Yenagoa, Bayelsa State, and FHA Estate at Osogbo, Osun State.
However, the bank was unable to sell the assets within the statutory period granted by the CBN for the recapitalisation to get the licence to operate as a national mortgage bank; thereby forcing it to be a fringe operator at a regional level. It was gathered that since the outcome of the recapitalisation, which the bank failed to achieve the parent body’s expectation of being a national operator, the FHA management has written to Igbinoba to return the uncommitted properties in its possession to no avail.
Yet, another source in the FHA informed The Nation that if at all the houses were sold, the amount realised from the sale could not be traced to any bank account despite Igbinoba’s claims that the money was in an account supervised by the CBN.
Other areas that has threatened the bank’s liquidity bothers on operational malpractices. This, the FHA Management, the bank’s Board of Directors and recently the CBN 2014 reports noted to include: the inability to ascertain the bank’s liquidity position, a factor being fingered as a probable reason the bank is most times unable to meet customers demand as the deposit liability is more than what is available in the bank; the huge difference between the N226.4million profit declared by the bank in 2014 with the actual cumulative profit of N64.9million as at 31/11/2014; the fears that bank’s shareholders fund of N2,968,188,000 as at December 2013 seems to have been eroded as a result of the huge lending made from the capital of the bank; the drive for deposit mobilisation is not taken seriously by the bank; hence the amount raised through recapitalisation has been loaned out to its customers and most of the loans are non-performing
The report also alleged that Igbinoba granted loans without the Board’s approval, including a personal loan of N35 million in 2014 at an interest rate of three per cent per year, whereas staff were charged 14 per cent interest per year.
While our sources said Igbinoba was called to answer queries on the development, his response has remained unsatisfactory. Yet, there are more issues causing serious concerns. For instance, in the build up to the 2014 CBN’s Risk-Rating evaluation, the bank’s interest income accounted for an average of 33 per cent over the past three years; thus allegedly making the principal sources of income highly volatile, hence not acceptable by CBN. Besides, the bank’s deposit for shares if capitalised,sources say, will only bring shareholders funds to N2.399 billion, which is still below the regulatory minimum of N2.5billion.
Also, worrisome is that the bank exceeds the single obligator limit of five and 20 per cent of its shareholder fund, thereby contravening Section 5.1(k) of the revised guidelines for primary mortgage banks (PMBs) in the country.
The management noted that the bank did not have an approval limit for the various grades of its services despite the Board’s Credit Committee recommendation of September 2014. It also observed that the loans granted by the MD to himself lacked proper documentation and contravenes section 7.3 (3) of the guidelines.
Other anomalies allegedly observed include that the bank did not implement some of the recommendations contained in the last examination report, thereby attracting financial penalty as contained in section 7.3 (23) of the guidelines; huge mis-match of deposits and credits in the time-bands of 1 – 30 days, 181 – 360 days and those above 360 days, and a poorly implemented debt recovery effort as only N5.718 million out of N253.183 million was recorded during the period in review.
“From the foregoing issues, bordering on the bank’s CEO’s operational and administrative inconsistencies with the regulations, as well as his failure to take corrections or implement directives from the Board of Directors despite verbal and written admonitions, it has become imperative to take the necessary step of involving a third party to assess the status of the operations of the bank in order to prove which of the sides is wrong,” the FHA management submitted, adding that this would enable a quick action desperately needed to salvage the bank from risks.
Since the creation of the subsidiary in 1997, the FHA, being the sole shareholder of the mortgage bank, has been supporting it technically and financially.The most recent landmark support was in 2013 when the CBN demanded that all PMBs must recapitalise to a minimum of N2.5 billion for state licence and N5 billion for national licence. Then, the FHA Mortgage Bank had its share capital in negative position of N269million. Therefore, the FHA had to intervene by giving the bank landed properties worth N11 billion and also injected cash of N500 million to enable the bank meet up with the CBN’s requirement.
Meanwhile, as the National Industrial Court in Abuja has restrained the board, from suspending Igbinoba. Justice M. N. Esowe issued the restraining order, following a motion ex-parte filed by his lawyer, Chike Okafor, in suit number NICN/ABJ/194/2015. The FHA, FHA Homes Limited and Chairman of the board, Prof. Mohammed Al-Amin are co-defedants.
The Board claims to have it has appealed the verdict.
