President Jonathan's decision to suspend CBN
Governor, Sanusi Lamido Sanusi yesterday Feb.
20th was based on a report of the Financial
Reporting Council of Nigeria, FRCR dated June 7,
2013. In the report, FRCR ripped apart the 2012
audited financial statement of CBN and exposed
what it termed as 'fraud', 'clear display of
incompetence',and 'excesses and wastefulness of
Sanusi and the CBN.'
The 13-page report claimed a whooping N1.257
billion was spent for 'lunch for policemen'. There
were also bogus payments to airlines to
distribute currency nationwide. The FRCR also
claimed CBN has held an account with a balance
of N1.423b for an unknown customer since 2008.
The report had recommended the sack of Sanusi
and his deputy.
You can read the full report here or continue to
read a breakdown of the report..
Culled from Punch
The report read: The particulars of the
infractions against Sanusi are:
Persistent refusal and/or negligence to
comply with the Public Procurement Act in
the procurement practices of the Central
Bank of Nigeria.
(A) By virtue of Section 15 (1)(a) of the
Public Procurement Act, the provisions of
the Act are expected to comply to ‘all
procurement of goods, works and services
carried out by the Federal Government of
Nigeria and all procurement entities.’ This
definition clearly includes the Central Bank
of Nigeria.
(B) It is however regrettable that the Central
Bank of Nigeria, under his leadership, has
refused and/or neglected to comply with the
provisions of the Public Procurement Act
(PPA). You will recall that one of the primary
reasons for the enactment of the PPA was
the need to promote transparency,
competitiveness, cost of effectiveness and
professionalism in the public sector
procurement system.
(C) Available information indicates that the
Central Bank has over the years engaged in
procurement of goods, works and services
worth billions of Naira each year without
complying with the express provisions of the
PPA.
(D) By deliberately refusing to be bound by
the provisions of the Act, the CBN has not
only decided to act in an unlawful manner,
but has also persisted in promoting a
governance regime characterised by
financial recklessness, waste and impunity,
as demonstrated by the contents of its 2012
Financial Statements.
Unlawful expenditure by the Central Bank of
Nigeria on ‘Intervention Projects’ across the
country
(A) the unacceptable level of financial
recklessness displayed by the leadership of
the Central Bank of Nigeria is typified by the
execution of ‘Intervention Projects’ across
the country. From available information, the
bank has either executed or is currently
executing about 63 such projects across the
country and has committed over
N163billion on them.
(B) it is inexcusable and patently unlawful
for any agency of government to deploy
huge sums of money as the CBN has done
in this case, without appropriation and
outside CBN’s statutory mandate. It is trite
that the expenditure of public funds by any
organ of government must be based on
clear legal mandates, prudent costing and
overriding national interest.
Financial infractions and acts of financial
recklessness committed by the Central Bank
as reflected in its audited financial
statements of 2012
(A) pursuant to Section 50 of the CBN Act
2007, a copy of the audited financial
statements of the CBN for the year ended
31st December 2012 was sent to Mr.
President. Based on the issues raised in the
financial statement, a reaction was
requested from you to enable a proper
appreciation of the nation’s economic
outlook.
(B) the response to this query was further
referred to the Financial Reporting Council of
Nigeria. The review by the council, rather
than allay the fears of government, further
confirmed concern bout the untidy manner
in which you have generally conducted the
operations of the CBN.
Some of the salient observations arising
from the review are;
(A) in a most ironical manner, it has
become obvious that the CBN is not able to
prepare its financial statements using
applicable International Financial Reporting
Standards (IFFS) whereas Deposit Money
Banks that the CBN is supervising have
complied with this national requirement
since 2012.
Undoubtedly, this laxity on the part of our
apex bank, apart from calling to question its
capacity for proper corporate governance, is
capable of sending wrong signals to both
domestic and international investors on the
state of the Nigerian economy.
(B) the provisions of the Memorandum of
Understanding (MOU) signed by the CBN
and other Deposit Money Banks on Banking
Resolution Sinking Fund have been
breached in a material manner. For example,
a Board of Trustees (BOT) to manage the
Fund has not been constituted since 2010
when it was established. The CBN has
however continued to utilise the Fund for
certain operations without approval of the
said BOT.
(C) contrary to section 34 (b) of the CBN Act
2007 which provides that the CBN shall not,
except as provided in Section 31 of the Act,
inter alia, purchase the shares of any
corporation of company, unless an entity set
up by the approval or authority of the
Federal Government,m CBN in 2010,
acquired 7% shares of International Islamic
Management Corporation of Malaysia to the
tune of N0.743 billion. This transaction was
neither brought to Mr. President’s attention
nor was a board approval obtained before it
was entered into.
(D) the CBN has failed or refused to
implement the provisions of the Personal
Income Tax (Amendment) Act 2007.
Accordingly the Pay-As-You-Earn (PAYE)
deductions of its staff are still being
computed in accordance with the defunct
Personal Income Tax Act 2004, thus
effectively assisting its staff to evade tax
despite the generous wage package in the
CBN, relative to other sectors of the
economy.
(E) the CBN had an additional brought
forward to General Reserve Fund of
N16.031bn in 2012 but proceeded on a boy
age of indefensible expenses in 2012
characterised by inexplicable increases in
some heads of expenditure during the year.
Examples include:
1. The bank spent N3.086bn on
“promotional activities” in 2012 (up from
N1.084bn in 2011). The bank spent this
sum even when it is not in competition with
any other institution in Nigeria;
2. The CBN claimed to have expended
N20.202bn on ‘Legal and Professional Fees’
in 2011 beyond all reasonable standards of
prudence and accountability;
3. Between expenses on ‘Private Guards’
and ‘Lunch for Policemen’, the CBN claimed
to have spent N1.257 billion in 2012;
4. While Section 6(3)(c) of the CBN Act 2007
provides that the board of the CBN is to
make recommendations to Mr. President
on the rate of renumeration to Auditors, the
bank has consistently observed this
provision in breach and even went to the
extent of changing one of the Joint External
Auditors without notifying the office of the
President.
5. In the explanations offered by the CBN
pursuant to presidential directives, it offered
a breakdown of ‘Currency Issue Expenses’
for 2011 and 2012. Interestingly, it claimed
to have paid N38.233bn to the Nigerian
Security Printing and Minting. Company
Limited (NSPMC) in 2011 for ‘Printing of
Banknotes.’ Paradoxically however, in the
same 2011, NSPMC reported a total
turnover of N29.370bn for all its
transactions with all clients (including the
CBN).
6. It is significant to note that the external
audit revealed balances of sundry foreign
currencies without physical stock of foreign
currencies in the CBN Head Office.
Questionable write-off of N40bn loans of a
bank
The above issues are only a few of the
infractions highlighted by the review and
which point to the gross incompetence and
recklessness which characterised the
operations of the CBN in the period under
review.
However, the CBN also claimed that it paid
Air Charter, such as payments to Emirate
Airline (N0.511bn), Wing Airline (N0.425bn)
and Associated Airline (N1.025bn) to
distribute currency by air nationwide.
Emirate Airline does not fly local charter in
Nigeria, Wing Airline is not registered with
Nigeria Civil Aviation Authority and
Associated Airline does not have a billion
turnover for 2011 because upon enquiry, the
management claimed that they have no
financial statements and have not had any
significant operations for the past two years
that will warrant preparation of financial
statements.
The breakdown also include “Currency Issue
Expenses” of N1.158bn and Sundry
Currency charges of N1.678bn under
“Currency Issue Expenses.” As they are in
2011 so are similar expenses in 2012.
These are difficult to understand.
Other areas of fraudulent activities include
1. Facility Management N7.034bn in 2012
(N5.751bn in 2011.
2. Foreign Bank accounts that have been
closed offshore were still operational in the
General Ledger for over six months after
they have been confirmed as closed
accounts by the offshore banks.
3. The “Know Your Customer” policy is not
properly followed by the CBN to the extent
that the CBN has unknown customer with
account balance of N1.423bn since 2008.
The CBN claim that it is taking steps to
obtain the required details regarding the
address of the customer.
Wastefulness
1. Training and travel expenses N9.24bn in
2012 up from N7.65bn in 2011.
2. Expenses on “ATM offsite policy change”
came to N1.045bn.
3. Expenses on “Non Interest Banking”
N1.359bn in 2012 up from N0.977bn in
2011.
The CBN is still very heavy on expenses on
“Project Eagles” spending N0.606bn in 2012
up from N63m in 2011.
Expense on newspapers, books and
periodicals (excluding CBN’s publications)
is N1.678 billion in 2012 up from N1.670bn
in 2011,
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