CBN’s Supervisory Role Under Scrutiny Over Bank’s N573m ‘Error’ Claim

metro

5 years ago

The Central Bank of Nigeria (CBN)’s Act of 2007 of the Federal Republic charges the Bank with, among others, the overall control and administration of the monetary and financial sector policies.

Consequently, the bank is to ensure monetary and price stability, maintain external reserves to safeguard the international value of the naira and as well promote a sound financial system in the country.

In addition to its core functions, CBN has over the years performed some major developmental functions, focussed on all the key sectors of the economy.

It is to the credit of the present governor, Godwin Emefiele that he sounded loud and clear from the inception of his administration, his desire to pursue, with vigour, the developmental role and which has resulted in the Bank’s direct involvement in such programmes as the Anchor Borrowers and direct interface with farmers in the distribution of equipment and other farm inputs.

However, in ensuring monetary and price stability, the regulator is expected to also ensure close monitoring and supervision of the banks, without which, the growth of the economy will be jeopardized.

It is on records that the bank carries out periodic examinations on the activities on the banks. This is also complemented by the quarterly, half and yearly reports by the banks which are first vetted by CBN, after serious work must have been done by the external auditors.

But recent revelations of movements of cash in and out of the country have become major concerns to analysts over the efficacy of CBN’s much mouthed cashless policy.

More worrisome, according to the analysts is the fact that the financial institutions may have not only become conduit pipes for siphoning funds out of the country, but also have perfected acts of doctoring annual reports, so much that, some banks produce two different types. One for the regulators and the other for the investing public.

This is why last week’s revelation by the Chairman and Managing Director /Chief Executive Officer of First City Monument Bank (FCMB), Adam Nuru, that N573million was posted into a church account in error since 2016 and was not public knowledge has left many analysts wondering the relevance of the supervisory role of CBN.

Precisely, last Thursday, 6th August Nigerians got the greatest surprise regarding the Probe of the suspended Chairman of the Economic and Financial Crimes Commission (EFCC), Ibrahim Magu by Justice Ayo Salami Probe panel, when on that fateful day Nuru testified that there was actually a bank transfer of #573 million into Pastor Omole’s church account, claiming, it was mistakenly transferred into the account.

Nuru, while giving evidence on the funds traced to the account, narrated that ” On January 16, 2016, we made a return to NFIU which indicated that there was a transaction of an inflow of well over N573million. (N573,228,40).
“This return was said to be in favour of Divine Hand of God Prophetic Ministries Account No 1486743019.
“After that report, we conducted an investigation and discovered that the lodgement which we reported to NFIU was an error.
“The error was as a result of the fact that we were using a bank application called Pinnacle-7. However, we migrated from that application to a newer version called Pinnacle-10.
“Usually, when the bank intends to migrate from one application to another, we utilise weekends to carry out the exercise. The migration involves moving all the balances of customers from the previous application to the new application. The account of the Divine Hand Ministries was moved during that migration.”

The bank boss also shockingly claimed there were 27 other bank accounts with similar error and that the #573m was total balance for 983 accounts in the bank at that time.

According to an analyst, who is a major player in the industry,

” This looks fishy and doesn’t resonate well with many of us if not all of us. How can a bank transfer error happened since 2016 without being detected?. Does it mean FCMB didn’t do annual audit since 2016 not to have detected this grave mistake, and that of 27 others or that CBN has not been doing its periodic scrutinising of the accounts of the bank. How about the external auditors?, Nigerians demand to know the relevance of the supervision and examination by CBN.

Querrying further, he said, what happens to the on-site and off-site examinations by CBN?.

Another analyst sees the development as portending serious danger for the economy.

“The banking sector is very critical to the economy being the major mover of the the economy and for this kind of lapses even with CBN claiming to be on top of economic situations, leaves mush to be desired,”.

” Something is certainly not adding up here. CBN should tell us what’s happening, ” says another analyst.

” The question many Nigerians are asking is why didn’t the pastor report when he found the money in his account. Again, the pastor was said to have claimed he never saw any alert. So, what happened? And the bank also said it posted in error to 27 different accounts. And the bank has apologised but I don’t think it is enough. Somebody is not telling the truth. How did the money find its way into Pastor’s account? “There are still questions for the bank to answer. For instance, if by 2016, you made a mistake, and you are just discovering it in 2020. Who will believe that? It just sounds like Macbeth’s fairy tale told by an idiot, full of sound and fury, signifying nothing”.

“But, at the end of the day, the bulk stops on CBN’s table, unless if the regulator has penalised the bank and it did not know it was penalised. This is Nigeria and anything can happen as we wake up everyday to hear new and bizarre news.”

But, all seems not to be well with the industry as revenues are shrinking and credit defaults are on the increase.

Consequently, analysts say the banks are expected to take a big hit to revenues and face rising borrowing costs this year as CBN measures to support the naira squeeze intensify as well as fallout from the coronavirus and the oil price shock.

For instance, Reuters reports that FBN Holdings Plc said last Monday that it has sold its life insurance company and invested the proceeds of 25 billion naira ($66 million) as equity into First Bank to boost its capital after restructuring its loan book.

Chief Executive Officer Urum Kalu Eke said FBN Holdings sold its 65% stake in FBN Insurance to South Africa’s Sanlam Emerging Markets, a minority investor in the business.

He said the group wanted to focus on improving shareholder value with the divestment and boost the capital position of its commercial banking unit, First Bank, to 16.53% as of June, from 15.5% a year ago, close to the regulatory minimum of 15%.

“The outlook continues to remain uncertain. We think that the remaining part of the year will be challenged,” Urum Kalu Eke, CEO, FBN Holdings said on an analyst call.

In 2010, CBN directed lenders to either sell their stakes in subsidiaries involved in activities including insurance, asset management and investment banking – or adopt a holding company structure, where those activities are separate from the holding of retail deposits

Interestingly, FBN PMI remained in the expansion zone but declined slightly by 2.04% to 52.8 points in July. The CBN PMI reading, on the other hand, increased by 9.25% but is still contracting (44.9 points).

However, the analysts say of the five sub-indices, only the supplier delivery time increased, which is reflective of the reopening of more businesses and a boost in general economic activities.

They were quick to add, however that the country may not have peaked in the Covid-19 infections as a very insignificant number of persons have been tested so far.

For instance, Bismarck Rewane in the current communique of the LBS Breakfast meeting says that South Africa which currently accounts for 53% of Africa’s total cases and is on the heel of a resurgence in infections has tested 4.8% (2.83million) of its population compared to its SSA peers, Nigeria (304,221) and Ghana (407,588). According to Bismarck and his think tank analysts, ” Testing and resource capacity have been major constraints in the region, forcing many countries to depend on the number of fatalities as an anecdotal proxy of the COVID picture.

As fatalities continue to climb, Nigeria is at a risk of heightened panic and social unrest. “