FRCN Open Case: Sanusi Spent $1bn+ As He Liked Yearly In Violation of Public Procurement Act (PPA)…Would Emir Face Criminal Prosecution?

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  • Then CBN governor Sanusi was accused of turning against Goodluck Jonathan after he had gotten wind of the damning FRCN report against him
  • Sanusi’s CBN for years engaged in procurement of goods, works and services worth billions of naira each year without complying with the express provisions of the PPA
  • There was unacceptable levels of financial recklessness displayed by Sanusi’s leadership of the apex bank typified by the execution of ‘Intervention Projects’ across the country
  • In 2012 alone the CBN under Sanusi had expended over N163 billion on about 63 of such projects across the country.
  • N20.202 billion was also allegedly spent on ‘Legal and Professional Fees’ in 2011 alone; and N1.3 billion in 2012 on ‘Private Guards’ and ‘Lunch for Policemen,’ among many others.
  • Training and travel expenses N9.24bn in 2012 up from N7.65bn in 2011
  • Expenses on “ATM offsite policy change” came to N1.045bn
  • 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

by Duru Ebube,

Being determined to urgently re-position the Central Bank of Nigeria for greater efficiency, respect for due process and accountability, President Goodluck Ebele Jonathan has ordered the immediate suspension of Mallam Sanusi Lamido Sanusi from the Office of Governor of the Central Bank of Nigeria.”
The move to sack Sanusi had long been rumored in the media as far back as June, last year.

It was however smothered by intervening developments including the fact that at the behest of the suspended CBN governor, some northern elders had prevailed on the president to soften on wielding the big stick against the alleged erring CBN boss.

There were also intervening developments in the polity such as the then alleged fractionalization of the ruling Peoples Democratic Party (PDP), led by dissidents who teamed to form the now rested new PDP.

Other developments in the polity included the unremitting onslaughts of the Islamist terror sect Boko Haram; as well as the controversial “season of open letters,” said to have been  inaugurated by the leaked letter of Sanusi to Jonathan alleging that the Nigerian National Petroleum Corporation (NNPC) had failed to remit $50 billion to the Federation Account.

As has been indicated, the recommendation of Sanusi’s sack by FRCN – the body formerly known as the Nigerian Accounting Standards Board – dates as far back as last June.

An earlier audit of the books of the apex bank in May, last year, by its external auditors, Ernst and Young, had caused eyebrows to be raised in the presidency, following which the FRCN was invited to test the CBN’s books for compliance with statutory best practice.

The organization’s 13-page report on Sanusi’s CBN, dated June 7, 2013, and on which his suspension was grounded, was damning.

It is said to have ripped apart the 2012 audited financial statement of the CBN and exposed what it termed as Sanusi’s  CBN’s ‘clear display of incompetence,’ ‘excesses and wastefulness,’ as well as ‘fraud.’

According to the report, the particulars of infractions against Sanusi are indeed legion, few being: Persistent refusal and/or negligence to comply with the Public Procurement Act (PPA) in the procurement practices of the CBN.

It stated that by virtue of Section 15(1)(a) of the PPA, institutions of the Federal Government, including the CBN, were expected to comply with provisions of the Act.

However, the apex bank under Sanusi’s leadership refused and/or neglected to comply with the said provisions, whose primary purport was the need to promote transparency, competitiveness, cost effectiveness and professionalism in the public sector procurement system.

According to the FRCN, Sanusi’s CBN for years engaged in procurement of goods, works and services worth billions of naira each year without complying with the express provisions of the PPA, thereby occasioning financial recklessness, waste and impunity, as demonstrated by the contents of its 2012 financial statements.

It maintained that the unacceptable level of financial recklessness displayed by Sanusi’s leadership of the apex bank was typified by the execution of ‘Intervention Projects’ across the country.

Hitherto, the CBN under Sanusi had expended over N163 billion on about 63 of such projects across the country.

The FRCN report thus stated, “it is inexcusable and patently unlawful for any agency of government to deploy huge sums of money, as the CBN has done, without appropriation and outside the CBN’s statutory mandate.

It maintained: “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.”

The report also observed that the apex bank flouted Corporate Governance Codes, as under Sanusi the CBN was unable to prepare its financial statements using applicable International Financial Reporting Standards (IFFS) whereas Deposit Money Banks, which the CBN supervises, have complied with this national requirement since 2012.

The FRCN also accused the CBN under Sanusi of infracting section 34 (b) of the CBN Act 2007, which provides that the apex bank shall not, except as provided in Section 31 of the Act, inter alia, purchase the shares of any corporation or company, unless pursuant to the approval or authority of the Federal Government.

However, the CBN in 2010, outside the knowledge of the presidency, acquired 7 per cent shares of International Islamic Management Corporation of Malaysia to the tune of N0.743 billion.

The report also accused Sanusi’s CBN of assisting its staff to evade tax, as the apex bank under Sanusi’s watch failed or refused to implement the provisions of the Personal Income Tax (Amendment) Act 2007.

It continued to compute the Pay-As-You-Earn (PAYE) deductions of its staff in accordance with the defunct Personal Income Tax Act 2004, thus effectively assisting its staff to evade tax.

There was also a legion of alleged bogus expenditure by the apex bank under Sanusi, which appears totally indefensible.

They include N3.086 billion spent on “promotional activities” in 2012 despite not being in competition with any other institution in Nigeria.

N20.202 billion was also allegedly spent on ‘Legal and Professional Fees’ in 2011 alone; and N1.3 billion in 2012 on ‘Private Guards’ and ‘Lunch for Policemen,’ among many others.

Section 6 (3) (c) of the CBN Act 2007 was also breached, the report alleged.

Accordingly, contrary to the provision of the said enactment, which provides that the board of the CBN shall make recommendations to the President on the rate of remuneration to Auditors, the bank even went to the extent of changing one of the Joint External Auditors without notifying the Presidency.

The report further indicated that external audit revealed balances of sundry foreign currencies. Yet there were no physical stock of foreign currencies in the CBN Head Office.

The apex bank also allegedly wrote off N40 billion loan of a bank in a questionable gambit plus a N1 billion donation it made in favour of a political party.

These probing allegations have continued to jolt the imagination of concerned Nigerians; which is why many believe that Sanusi’s suspension is in order, as it will pave way for untrammeled investigation of the apex bank under the man, at least for the purpose of unearthing of the truth.

Some lawyers, however, maintain that the government should tread softly with instituting criminal action against the man, saying the move may overheat the polity.

Indeed, ever since Sanusi’s suspension was announced, the activities of Islamist terrorists have coincidentally spiked, becoming more frequent in parts of the northeast like Borno and Yobe States.

It goes without saying that Sanusi’s tenure at the CBN was marked by political dabbling.

Once, the man acted as Boko Haram spokesman when in 2012 he tried to justify the sect’s onslaughts as partly a reaction to federal government’s continued funding of the 13 per cent derivation formula in favor of Niger Delta States, which, according to him, had left the north more impoverished than other parts of the country.

Besides, apart from allegedly donating N1 billion to the opposition All Progressive Congress (APC), he had also donated money to victims of the sect’s attack in his home state of Kano, among others.

Thus, many see the man as politically involved, maintaining that touching him may inevitably constitute a touching of the apple of some disgruntled people’s eyes.

This line of thought has been canvassed by Barrister Phil Olisa-Ashiri while conversing with Daily Newswatch in a telephone chat.

According to him, “I would say that the prosecution of Sanusi – if investigations establish criminal offences against him – may engender an overheating up of the polity.

“The polity is already heated up considering that we are in the eve of an election year. So to commence the prosecution of Sanusi any moment soon may likely inflame passions in some quaters.

“For now it would be enough if he is indicted. An indictment will keep him from being considered for any public office.

“That is also good for the government in the sense that the man’s penchant for recklessly running his mouth would be curtailed.

“I am however not in anyway saying that a criminal action should not be brought against him for whatever reason.

“I would rather that his trial should be a little delayed. I guess it should commence when a new government emerges in 2015, after-all the statute of limitation does not apply to criminal matters.

“I mean that time does not run against the power of the state to prosecute an offender.

“So a crime committed now may be brought for trial anytime, even in the future.

“All the state needs is sufficient evidence needed for entering an action against an alleged offender.”
In this connection, it is believed that the Jonathan administration owes Nigerians the duty of damning the political consequences and testing the allegations against Sanusi in a competent court of law.

Many feel this is urgently required to prove that government’s action against the man was not just a witch-hunt, but one informed by utmost good faith and the public good.


The main extracts of the FRCN report reads

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.

Sanusi with mistress Maryam Yaro

 

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.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of NewsRescue

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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