The FRC strike on Stanbic IBTC
THE Financial Reporting Council (FRC), shot into public consciousness many months ago. A hitherto obscure body under the supervision of the Federal Ministry of Trade and Investment, the government of Goodluck Jonathan found it a useful tool when it sought to cut former governor Lamido Sanusi of the Central Bank of Nigeria (CBN) to size.
Out of nowhere, the FRC emerged with an “audit” which it said it had conducted on the affairs of the CBN during the tenure of Lamido Sanusi. It turned out that the FRC had been accuser, prosecutor and judge in the very well orchestrated case. Sanusi’s tenure as CBN governor ended unceremoniously.
Recently, the FRC says it has withdrawn the rights of certain directors of Stanbic IBTC Bank as well as its auditors, KPMG, to attest to any financial statements in Nigeria. In other words, acting without a supervisory board, and without a supervisory minister, the Executive Secretary of the FRC has single-handedly striven to indict major internationally rated multinationals operating in Nigeria. In the process, he calls to question the issue of how serious Nigeria really is regarding attracting and nurturing foreign investment as a fillip to our economic growth and development aspirations.
On what grounds? A few shareholders had lamented the payment of “technical” fees by Stanbic IBTC to its parent, Standard Bank of Africa. In their view, Stanbic IBTC need not pay “technical fees” to its parent. Payment of technical fees or franchise fees as the case may be, is common practice when dealing with multinational corporations. These are companies that have made investments across geographies and which also share assets – both tangible assets like skilled manpower and intangible ones like the brand name. Global practice is that just as the operating subsidiaries share the benefits of these assets, so must they share in the cost or liabilities. Technical fees or franchise fees are, therefore, very common practice that need not ordinarily evoke any controversy.
Interestingly, it is to the credit of the shareholders that the case had even been taken to court and is currently awaiting adjudication.
The development is scary and calls for urgent intervention at the highest quarters. Regulators do not understand their mandates that they owe a duty to the government, the consumer as well as the investor; and that it is in painstakingly balancing out these interests that they can extract optimal value for the economy.
Unfortunately, the damage has since commenced. Reports indicate that the company’s share price has since taken a plunge. During the week, a group of the bank’s shareholders called a press conference to complain that they were alarmed at how badly the FRC had managed the issue with the consequence that their investment was depleting by the day.
The shareholders, interestingly also called upon President Buhari to constitute the Board of the FRC, advising that “it should comprise experienced, honest and diligent Nigerians who are exposed to how corporations operate across the world.”
There is an urgent imperative too, to deploy a tested technocrat to the Ministry of Industry, Trade and Investment, said the shareholders. “This minister will also exert a controlling influence on the activities of the FRC and help ensure that the good intentions of government are not thwarted by incompetence and lack of exposure,” said the shareholders.
• Adekunle, an economic and financial policy analyst, writes from Lagos