N10bn fine: FRC accuses CBN Governor

By ODUNEWUSEGUN

THIS may not be the best of times for Godwin Emefiele, Governor of the Central Bank of Nigeria, CBN as rising regulatory sanctions, occasioned by wilful contravention of guidelines are threatening his position as the chief executive of the apex bank, National Daily investigations have shown.
Besides, the rising trend which has cost some banks about N10 billion in the last one month, there are indications that all is not well and alleged unwholesome practices seem to threaten the corporate governance tenets which the CBN Governor swore to uphold and defend.
Consequently, Jim Obazee’ Financial Reporting Council is tackling Emefiele on the seeming lapses with the Federal Government insisting that CBN would be sanctioned if it is discovered that the infractions were there before the approval of the financial statements by CBN.
For instance, in the recent past, UBA and Firstbank were slammed N2.9billion and N1.9billion respectively for failing to remit over N250billion government funds under the Treasury Single Account, TSA.
Skyebank was last week slammed with N4 billion for the same infraction. But the recent imposition of N1 billion on Stanbic IBTC by FRC over what it considers as a barrage of offences by the bank ranging from non-disclosure to wrong classification may be the Achilles hill for Emefiele.
Emefiele’s belated face-saving device by attempting to discredit FRC and reversing the sanctions meted out to Stanbic IBTC bank seems to be threatening the CBN Governor’s position.
Obazee, in his defence accused the CBN of acting in bad faith and lacking the basic understanding of what they have done.He was categorical when he said that Emefiele’s action amount to an affront on not the FRC as an institution recognised by government but also on the government itself.
“His Excellency, the Chief of staff to Mr. President, met with you and I in his office and advised that we schedule a meeting to come up with a harmonized position as two regulators on the review of the financial statement of Stanbic IBTC for years ended 31st December 2013 and 2014. He went further to state that the CBN should also be sanctioned if it is discovered that the errors observed in the said financial statement are true because the CBN approved the said financial statement before they were issued. At that meeting, you claimed that what the CBN had done since you received the regulatory decision of the FRC was to get an opinion from a consortium of lawyers on the provision of the FRC act 2011. You said your next step was to invite foreign lawyers to review the opinion you received. You even sought the permission of his Excellency, the chief of staff, and read out selected paragraphs of the opinion you got from the consortium of lawyers.
“At the end of that meeting His Excellency, the Chief of Staff, directed as follows: That a team from the CBN should visit Stanbic IBTC to review the records again to know whether the errors where due to oversight or incompetence or compromise; that the FRC should secure a written position on the matter from the external auditors of Stanbic IBTC; finally, that you and I should agree a date to meet thereafter and review the document received and reach a final decision.
Immediately after that meeting you and I met in the waiting area of the office of the chief of staff and agreed to meet on November, 2015.”
Obazee further said the meeting did not hold but rather CBN came up with its own decision and maligning FRC. “One wonders why the CBN is condoning and vehemently defending an unwholesome disclosure and reporting practice such as this”Obazee added.
But some analysts say these regulatory sanctions and the macroeconomic headaches in the economy will further worsen the balance sheets of some firms, with attendant stunted growth, unless necessary measures are put in place, analysts say.
Already analysts at Ecobank said yesterday that the Nigerian Stock Exchange (NSE) All Share Index (ASI) “depreciated by 0.86% to close at 29,572.90 point, with Year-to-Date (YTD), depreciating by 14.67%. The depreciation was due to the losses recorded in the share prices of some highly capitalised stocks such as Unilever, Guinness, FBN Holding, GT Bank and Zenith Bank. The market capitalisation depreciated by 0.86% to close at N10.16trn.”
According to analysts at Afrinvest , “the Nigerian capital market and business community have been hit with a string of “bad news” in the last few days, as unimpressive earnings releases – including the monumental loss reported by OANDO Plc – filtered into the market. The sequence of negative press was further amplified by regulatory sanctions on select listed and unlisted companies for alleged regulatory breaches.
The actions and reactions that have trailed these events have brought to the fore questions on regulatory compliance, corporate governance and risk management practices of companies operating in Nigeria. These have also raised concerns — rightly or wrongly — on the business friendliness of Nigerian regulators to foreign investors.
Expectedly, investors’ sentiment on the companies involved have ebbed, resulting in major sell-offs on both the Nigeria and South African bourses.”
Speaking further, the analysts said, “Putting all this together, should foreign investors stay well clear of the Nigerian investment environment? Although we believe the timing of the above unsettling news flow is rather bad for the market, given the mammoth besetting of macroeconomic headaches in capital market at the moment.”
Already some analysts said at the weekend that the ongoing rivalry and impunity in the banking industry would further compound the earnings of most of the banks which had bad outing in their quarter three results.
For instance, investors reacted swiftly the following day the sanctions were announced by dumping the shares of both FBNH and UBA as the Tickers fell 3.0% (FBNH) and 2.0% (UBA) each at the close of trade on Monday.
While the loses sustained by UBA may have been moderated by its impressive Q3:2015 earnings release which indicated that the Bank’s Gross Earnings expanded by 17.3% to N247.2bn, even as PBT and PAT surged 34.8% and 44.4% to N57.4bn and N48.6bn respectively for the nine months period, that of FBNH was compounded by the Bank’s Audited its  nine months earnings numbers which indicated that Gross Earnings expanded 16.9% to N390.0bn but PBT and PAT declined significantly by 19.2% and 9.7% to N59.6bn and N50.2bn respectively.
Their analysis further showed that based on the 9 months result already released by both banks, a N1.88bn fine on FBN Holdings implies a 3.7% drag on Profit After Tax (PAT) while N2.9bn fine on UBA will slash PAT by 6.1%. On the basis of the analysts’ FY:2015 Gross Earnings and PAT forecasts for both banks, they expect the sanction of FBN Holdings to represent 0.3% of N575.4bn forecast gross earnings and 2.5% of forecast PAT of N74.7bn.