Shareholders Versus Stanbic IBTC Bank Face-off Reopens Old Friction Between CBN, FRC

NO love has been lost between the Financial Reporting Council of Nigeria (FRCN) and the Central Bank of Nigeria (CBN), since about two years ago when the FRC provided the leeway with which the former President, Dr. Goodluck Jonathan sacked the then Governor of the apex bank and now Emir of Kano, Mallam Sanusi Lamido Sanusi over allegations of misstatement of its account.

The current 2007 CBN Act sets very stringent conditions under which a CBN Governor can be fired by the President, requiring a two-third vote of the Senate of the Federal Republic of Nigeria. The Act, however, empowers the President to fire the apex bank governor if there is an established proof of fraud and other related crimes against the occupier of that office

Now when the former CBN Governor went wild with allegations of crude oil monies missing from non-remittances by the Nigerian State Oil Company, the NNPC to the Federation Account, President Jonathan felt embarrassed, particularly after a Senate Committee, which looked into the allegation found otherwise. The former apex bank Governor kept switching from one figure to the other as being the amount in question. Jonathan was hamstrung, as he couldn’t secure the Senate’s two third requirement to axe him as Mallam Sanusi became a bone in the authorities’ throats and they beamed a searchlight on his activities until it was discovered that the CBN, which he led had queries with its statement of account, which had just been vetted by the FRC.

It was only a matter of weeks for then President Jonathan, relying on that allegation of fraud to fire Sanusi.

The FRC is an agency of the Federal Ministry of Trade and Industry, charged with the mandate of the proper keeping of the books of accounts to ensue transparency and accountability by both public and private sector organisations in Nigeria, including the CBN, with a view to engendering global confidence in the country to attract foreign direct investment (FDIs).

Now, both the FRC and the CBN undertake some form of complementary roles in the vetting of banks’ books of accounts, as the financial institutions are expected to make their audited accounts available to the two organisations for scrutiny, to ascertain if they were accurately kept. This is the thrust of the current fracas between the two agencies as they haggle over whose mandate it is to give a final say on a bank’s financial statement, even as the battle now shifts to the Court of Law to interpret whose mandate it is.

The FRC last week directed the Chairman of Stanbic IBTC Bank, Mr. Atedo Peterside and some directors of the Bank to proceed on suspension, as well as some KPMG Auditors who worked on the Bank’s Account for what the FRC Executive Secretary, Mr. Jim Obazee described as a mis-statement. And in swift reaction, IBTC challenged the Council’s action and dragged it before a Law Court. The matter is pending.

However, the CBN Governor, Mr. Godwin Emefiele in a surprise move wrote the Bank to counter the FRC’s directive and directed the affected Bank Chiefs to stay put and continue their works, raising the issue of procedure by the FRC in its decision.

The Executive Secretary of FRC Mr. Obazee within the week was out of reach as he was said to be outside the country. However, a source in the agency said the Council stands by its position, as it does not receive regulation from the CBN.

The source said: “The matter between FRC and Stanbic IBTC is in court. Stanbic IBTC took FRC to court last week. While the CBN has authority to regulate banking in the country, that authority does not extend to questioning the authority of the FRC over financial reporting in the country. FRC does not report to CBN.”

It would be recalled that following a petition to it by some Minority shareholders of Stanbic IIBTC Bank, against the Bank Board and Management, alleging plans to rip them off their entitlement, the Financial Reporting Council (FRC) stepped into the controversy to investigate the claim by the complainants about a plan by the Board of the Bank to raise a fresh N18 billion rights issue when the Bank is allegedly warehousing several billions of Naira it hopes to repatriate out of the country, purportedly for a fee for a franchise.

The shareholders are contending that the franchise had not been sanctioned by the Nigerian regulatory agency – the National Office for Technology Acquisition and Promotion (NOTAP).

Obaze explained last month that the FRC was interested in the matter because it falls within the precinct of its mandate to protect investors and prevent attempts by unscrupulous public entities to deny government its fare share of revenue in form of taxes for the business activities they undertake in the country.

Mr. Obazee spoke more on the Standard – IBTC/shareholders’ controversy: “The petition from the stakeholders of Stanbic IBTC is on issues relating to Stanbic IBTC and the way they have been accruing some monies in their account. And if you accrue money in your account, well there is noting wrong with accruing monies, but it must be disclosed properly. Now, the shareholders said the accruals was requiring NOTAP approvals before they can make those payments and they are saying that there is no need making those accruals because IBTC has not being able to secure NOTAP approval.

He continued: “The petitions kept coming and then we invited Stanbic IBC to hear their side in the matter. And listening to their side of the story, we believe that the petitioners have a good case. So our next step is to look at the agencies that were duly involved. NOTAP itself, which will give the approval; CBN as regulator and Security and Exchange Commission, because they were asking for general mandate for the treatment of third party transactions, which we were against because that will not be in line with related party transactions accounting standards.

“We are here to also find out if NOTAOP approved any of these payments, such as Historical fees. We are looking at transactions from 2011 to date. If they didn’t get approval for 2011 fees, didn’t get for 2012, 2013, 2014, so why are they keeping these monies?

He had earlier described as worrisome the activities of some public agencies, particularly the banks concerning their observance of accounting standards in Nigeria, citing the 2011 World Bank ROSC (Report of Observance of Standards and Codes) –Accounting &Auditing) which was submitted to the Federal Government of Nigeria in June 2011. 

According to him: “The document contained very disturbing and yet revealing facts. The ROSC A&A focused on the institutional framework regulating accounting and auditing practices, and the comparability of national accounting and auditing practices with international standards and best practice, using International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA) as benchmarks. It evaluates the effectiveness of enforcement mechanisms for ensuring compliance with applicable standards and codes. An overview of the ROSC A&A Programme usually includes rationale and detailed methodology.”

The Acting Director General of NOTAP, Dr. Dan-Azumi Mohammed Ibrahim, while giving insight into the matter said the Office had turned down the application for the approval of the foreign franchise sought by Stanbic IBTC bank because the technology could be sourced locally.
 
He said: “We regulate the inflow of foreign technology into the country and at the same time develop local technology. Well NOTAP is expected to register Stanbic IBTC with its foreign partner and we have a guideline on how we do our registration. We are guided by the forex manual of the CBN.

The Chairman of the Bank’s Board of Directors, Mr. Atedo Peterside has in several fora since the controversy denied a plan to short-change the Nigerian shareholders through the planned management/ franchise deal, but speaking with newsmen in Abuja last week, Chairman of the Minority Shareholders Association of Nigeria, Dr. Mukhtar Mukhtar insisted that it was part of a larger plan by the South African based Standard Bank, owners of the Nigerian Stanbic IBTC Bank to seriously dilute the Nigerian shareholding in the bank. 

In the days and weeks ahead, it will be clear where propriety resides as the judiciary takes charge.