19th February, 2014
Reference:
Mallam Sanusi Lamido Sanusi Governor,
Central Bank of Nigeria, Abuja.
SUSPENSION FROM OFFICE
1.
Following the Report of the Financial Reporting Council of Nigeria on
the Audited Financial Statements of the Central Bank of Nigeria (CBN)
for the year ended 31st December 2012, and other related issues, I write
to convey to you His Excellency, Mr. President’s decision that you be
suspended from office as Governor of the Central Bank of Nigeria with
effect from Thursday 20th February 2014.
2. The decision is
predicated on the loss of confidence in your ability to lead the Apex
Bank towards the achievement of its statutory mandate. Of particular
concern is the fact that, under your watch, the bank has carried out its
functions in a manner characterised by disregard for due process and
accountability.
3. This is exemplified by various acts of
financial recklessness and unprofessional conduct which are inconsistent
with the administration’s vision of a Central Bank propelled by the
core values of focused economic management, prudence, transparency and
financial discipline.
4. The particulars of the infractions are highlighted below:
5.
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 apply to all
‘procurement of goods, works and services carried out by the Federal
Government of Nigeria and all procurement entities.’ The definition
clearly includes the Central Bank of Nigeria.
(b) It is however
regrettable the Central Bank of Nigeria under your leadership, has
refused and/or neglected to comply with the provisions of the Public
Procurement (PPA). You will recall that one of the primary reasons for
the enactment of the PPA was the need to promote transparency,
competitiveness, cost effectiveness and professionalism in the public
sector procurement system.
(c) Available information indicates
the Central Bank has over the years engaged in procurement of goods,
works and services with 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 also persisted in promoting a
governance regime characterised by financial recklessness, waste and
impunity, as demonstrated by the contents of the 2012 Financial
Statements.
6. No responsible government will tolerate this
blatant disregard for its laws and procedures by any person or
institution. The Central Bank, by its unique position, ought to show
good example and be the leading light in the promotion of the culture of
observance of due process.
7. 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 (sixty-three) such projects across the country. Please find
attached hereto as Annexure I, a letter dated January 7th, 2014 from the
CBN confirming the list of projects across the country to which the CBN
has committed N163 Billion (One Hundred and Sixty Billion Naira).
(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 the CBN’s statutory mandate. It is trite that
the expenditure of public funds by any arm of government must be based
on clear legal mandates, prudent costing and overriding national
interest.
(c) Cognisant of the attendant negative consequence of
the CBN’s action, a review of the Central Bank (Establishment) Act 2007
does not disclose any legal basis for the huge expenditure on
intervention projects in default of appropriation.
8. Financial
Infractions and Acts of Financial Recklessness Committed by the Central
Bank as reflected in its Audited Financial Statements for 2012.
(a)
Pursuant to Section 50 of the CBN Act 2007, a copy of the Audited
Financial Statement of the Central Bank for the year ended 31st December
2012 was sent to Mr. President (Please, find a copy attached hereto as
Annexure II). Based on the issues raised in the financial statement, a
response was requested from Sanusi to enable a proper appreciation of
the nation’s economic outlook. (Please, find attached a copy of the
letter dated 4th May, 2013 as Annexure III).
(b) Your response to
this query (Annexure IV) was further referred to the Financial
Reporting Council by a letter of 12th April, 2013, for review (Annexure
V).
The review of the Financial Reporting Council of Nigeria, rather
than allay the fears of Government, further confirmed concern about the
untidy manner in which you have conducted the operations of the CBN
(Annexure VI).
9. Some of the salient observations arising from the review are highlighted below:
(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 (IFRS) whereas Deposit Money Banks that
the CBN is supervising have complied with this national requirement
since 2012. 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 (DMBs) 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 the 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 or company, unless an entity set
up by the approval of the authority of the Federal Government, CBN in
2010, acquired 7% shares of International Islamic Liquidity 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 N16.031 Billion in 2012 but
proceeded on a voyage of indefensible expenses in 2012 characterised by
inexplicable increases in some heads of expenditure during the year.
Examples include:
(i) The bank spent N3.086 Billion ‘promotional
activities’ in 2012 (up from N1.084 Billion in 2011). The bank spent
this sum even when it is not in competition with any other institution
in Nigeria;
(ii) The CBN claimed to have expended N20.202 Billion
on ‘Legal and Professional Fees’ in 2011, beyond all reasonable
standards of prudence and accountability;(iii) Between expenses on
‘Private Guards’ and ‘Lunch for Policemen’, the CBN claimed to have
spent N1.257 Billion in 2012;
(iv) 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 remuneration to
Auditors, the Bank has consistently observed this provision in the
breach and even went to the extent of changing one of its Joint External
Auditors without notifying the office of the President.
(f) 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 a total of N38.233 Billion 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 N29.370 Billion for all its
transaction with all clients (including the CBN)
(g) 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.
10. Questionable write-off of N40 billion naira loans of bank
You
may wish to specifically not Annexure VII which highlights a number of
transactions and breaches, which include the write-off of loans
totalling N40 billion
11. The above issues are only 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.
12. In light of the foregoing,
and pursuant to the provisions of Section 7 (2) (a), Section 8 (1) (k),
Section 62 (1) (c) and 62 (3) of Financial Reporting council of Nigeria
Act, a copy of this letter is being forwarded to the Executive Secretary
of the Council for his notification and further necessary action with a
view to addressing the urgent need to reposition the bank for the
effective discharge of its statutory mandate.
13. You are, by
this letter, directed to hand over to most senior Deputy Governor, Dr.
Sarah Alade who will act as Governor till the conclusion of the
investigation into these far reaching breaches.
Please accept, as always, the assurances of my highest regards and esteem.
Anyim Pius Anyim, GCON
Secretary to the Government of the Federation
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