Sanusi-led CBN lacks corporate governance — FRC

•No board approvals for financial transactions
•Investment in Islamic liquidity management had no board approval
•Governor as chairman of board, error of law CBN governor,



Sanusi The Central Bank of Nigeria under the leadership of Lamido Sanusi was accused of lack of corporate governance by the Financial Reporting Council in its report to the President on the CBN.The report signed by Jim Osayande Obazee, FRC’s Executive Secretary, said that there was very weak corporate governance in the CBN as transactions that needed board approval were carried out in the apex bank without such approvals.Recall that the Lamido Sanusi-led CBN had removed some bank executives on the basis of lack of corporate governance.The FRC report on CBN stated: “A number of transactions and even of a financial nature were carried out without board approvals as no board approvals were provided as requested.This shows a very weak corporate governance of the CBN and clear evidence that statutorily allowing the CBN Governor to be both the chief executive officer of the bank as wnepotismell as chairman of the board is the greatest error made in the conception of the CBN act 2007.According to the Financial Council Report, the board approval for the equity investment in the shares of International Islamic Liquidity Management Corporation of Malaysia to the tune of N0.743 billion is also not provided. The share certificate is also to be provided as it seems that section 34 of the CBN Act has been violated.It said that the date of the board approval of the apex bank’s financial statements was not disclosed. It further disclosed that in the CBN response, “Your Excellency is therein informed that the management letter on the financial statement is yet to be discussed by the Board Audit and Risk Management Committee.This is contrary to section 3 (b) of the CBN Act 2007. This is supposed to take place, considered by the Board and decision taken.”Accounting issues identified usually lead to adjustments in the financial statements before the approval of the board is secured on the accounts. It said that a number of issues on the draft management letter can testify to this.According to the Council, what this means is that the financial statement submitted by the CBN Governor to the President was not approved by the governing board of the apex bank.The Financial Reporting Council report on CBN 2012 account further observed that the Financial statement was highly abridged with poor disclosures of transactions and events that are of financial nature.The breakdown provided to some items seems to be allocation of figures to arrive at predetermined numbers.Giving clear instances, it said the breakdown of loan provisioning amounting to N586.703 billion has figures that seem more like figures to ensure that the total is arrived at.Therein is staff loan of N34,789,071; bankers’ payment of N900; National Biotechnology Development Agency of N1051. It also contains CBN contributory pension fund of N122,562,355.This should not have been accounted for under this classification. It also contains figure for Wema Bank – N50,061,710,108 and AMCON – N500 billion without the unsubstantiated balance of N236,521,506.05.A breakdown for the Center for Excellence contains several invoices with amounts that are identified simply as ‘others.’The report said that AMCON made a loss of over N2.4 trillion and also had a negative total equity of over N2.3 trillion at the end of 2011.AMCON’s 2011 accounts were signed by the board on 8 October 2012. This is to the full knowledge of the CBN since it owns 50 per cent of AMCON share capital and has directors on the board of AMCON.It said that the CBN rightly explained that AMCON’s bonds are gilt-edge securities of the Federal Government of Nigeria (FGN) {in their response, 7 (d )} but did not disclose to Mr. President that a large portion of this sovereign instrument is to mature by December 31st 2013 and the inability of FGN to fulfill the guarantee may affect credit risk rating of Nigeria negatively.The fact that it was not budgeted for in 2013 by the FGN coupled with the fact that the CBN was even expecting N713 billion therefrom, were enough reasons for the leadership of the CBN to have drawn the attention of Mr. President to the matter in accordance with section 2 (e) of the CBN Act 2007.The Council in its report said: “Your Excellency is invited to note that the explanation provided by the leadership of the CBN is unsatisfactory.Accordingly, your Excellency may wish to take the necessary steps to brief the Senate on the matter and on the financial implication in the immediate future as AMCON’s bond falls due and the sovereign guarantee called thereto; exercise the powers conferred on Mr.President by section 11 2 (f) of the Central Bank of Nigeria Act 2007 or invoke section 11 2 (c) of the said act and cause the CBN governor and the deputy governors to cease from holding office in the CBN.The Financial Reporting Council further recommended that the President should direct the council to carry out full investigation of the activities of the CBN, in accordance with section 62 (3) of the Financial Reporting Council of Nigeria Act no 6, 2011 within a period of 90 days or in accordance with section 11 4 of the CBN act 2007. It also asked the President to decide that those found to be culpable be prosecuted accordingly.The Council further said: “It is important that quick and decisive action is taken so that the opposition to the Federal Government does not take advantage of the information and use it against the government that your Excellency was aware of the lax in CBN and allowed it to stay for political reasons.It is also important that the CBN governor and or the deputy governors do not decide earlier than your Excellency as they may resign their appointment to foreclose the action of the Federal Government and whatever action taken thereafter shall be regarded as politically motivated.