Last week was very eventful with a screaming headline in one of the newspapers calling for the probe of Central Bank of Nigeria (CBN) over alleged N500 billion fraud. This was a fallout of the leaked audio clip to the socio-media in the previous week, which happened to be the week the news of Godwin Emefiele’s reappointment as the CBN governor broke.
As usual, there were many versions of the audio clip, at least I got two versions. I quickly dismissed the first version, which started with Godwin’s voice asking someone to step aside, apparently, to pick a phone call and subsequently, there were incoherent voices here and there, obviously cloned to simulate and make up a story; a cock and bull story. The first version I got was very short but to the mischief makers it was to become the real Smoking Gun.
The following day, I got another version and I listened clearly to the audio, yes, it was Godwin’s voice and in his usual style of hands on management of “issue” in an utmost professional way, he was weighing the issue, unpacking it and guiding his team to stay within the limit of balance sheet structuring without breaking any accounting rules or ethics of banking.
He defined the problems, he asked for the options his subordinates had. They told him there were accruals here and there totaling N20 billion to absorb partly, the “item”. None of the options discussed and acceptable to Godwin was unethical and unprofessional.
He knew the “item” might have to be taken to shareholders fund. In the leaked telephone conversation, Godwin warned them of the consequence of writing off the whole “item” against shareholders fund balance of N35 billion because that could throw the Central Bank shareholders fund into huge negative balance.
Apparently, the whole “item” could be greater than the shareholders fund. Truly, how can you explain this to the international community that a whole lender of last resort, Central Bank of Nigeria, has a negative shareholders fund, hence his agonizing and lamentation in the phone conversation that his detractors have turned to their smoking gun.
To redefine the problem after the brainstorming session, Godwin asked for the remaining value of the “items” again, after setting it off against the accruals and the worst case scenario of the shareholders fund taken the hit. Which is normal and his subordinates said it would remain N110 billion to N115 billin, without wiping off the shareholders fund completely.
So if we back calculate, it was obvious the “item” ab initio can’t be more than N150 billion or N170 billion. So where is the N500 billion fraud coming from? Fussy mathematics!! Could this be the intendment of the smoking gun and the weird caption of the leaked audio tape: “N500b fraud”. Detractors rose up and started asking the National Assembly not to confirm his reappointment and that CBN should be probed for the N500 billion fraud and/or the missing monies.
Trust Nigerian politicians, spinning of the issue started, “he must have helped the presidency to win election, or he must have been reappointed to cover the N500 billion fraud, bla bla bla” and hence the screaming headlines on this week newspapers asking FG to probe CBN. The N500 billon was unthinking, yet the noise would not stop.
The press statement from CBN has cleared the air. The “item” arose when CBN was approached in 2015 to assist state governments with Conditional Budget Support, in order to ensure that ordinary Nigerian workers got their salaries, pensions and gratuities.
However, in closing the bank’s 2018 accounts, external auditors in their Draft Account, erroneously classified about N150 billion of these loans as bad, which negatively affected the bank’s balance sheet and shareholders fund.
Obviously, it soon became clear that a state government loan cannot be classified as “bad” or “irrecoverable”. The bank then reached out to the Federal Ministry of Finance and they jointly gave comfort to the auditors who accepted in writing that these monies would be repaid. On this basis, the auditors reversed the negative entry and then certified that the CBN’s 2018 accounts were a true reflection of the state of affairs. The item is no more a bogey, it is a normal transaction!!
So there is no smoking gun anywhere, the God has won again; the reappointment of Godwin Emefiele has since been confirmed by the Senate for him to serve another five years so as to continue to grow the country’s foreign reserve and to support the real sector growth without compromising foreign exchange stability.
As a prudent manager, I will expect Emfiele to continue to target inflation and maintain the positive real interest rate regime. Although he has attained the low side of double digit inflation rate, a single digit will be desirable for him to free more savings for investments and to create opportunity to reduce the lending rate and to stimulate further growth of the economy.
Bolorunduro, PhD writes from Abuja.