How MTN, four banks perpetrated $8.13 illegal deal, by CBN

The Central Bank of Nigeria (CBN), yesterday, gave details of how MTN Nigeria Limited and four banks perpetrated the $8.13 billion illegal transactions, using false information and deliberate disregard for the rules.

The details, which were contained in a CBN’s letter to the organisations involved in the saga, became necessary following denial of culpability in the illegality that has been described as a crime against the country.

The apex bank said the first error was when the Certificate of Capital Importation (CCIs) at the time of investment by MTN Nigeria showed $59.436 million as shareholders’ loan and $343.153 million as equity, but turned to $399.594 million as shareholders’ loan and $2.996 million as equity investment as at December 2007.

This position was, however, contrary to the CCIs issued by Standard Chartered Bank Limited, Citi Bank and Diamond Bank, which constituted a rendition of false returns to the CBN.

According to the statement signed by the CBN Governor Godwin Emefiele, when Standard Chartered Bank Limited subsequently applied on behalf of MTN Nigeriafor the conversion of the shareholder’s loan to preference shares, it did not wait for any board resolution or submit documentary evidence of the resolution to CBN before it hurriedly issued new CCIs in support of the illegal conversion of the shareholders’ loan to preference shares.

On December 10, 2009, Standard Chartered Bank Limited admitted its decision as error in a letter to the apex bank, in which it described the act as an “unintended omission.”

It was disclosed that the bank also issued three CCIs outside the regulatory 24 hours, without the approval of the CBN; failed to issue a procedural letter of indemnity to the CBN against double remittance; and aided the illegal repatriation of $3.448 billion, which it has now been ordered to refund to the CBN with immediate effect.

Stanbic IBTC Bank also reported 35 CCIs valued $313.683 million inappropriately as “other purchases” in a document to CBN in February 2008, instead of “capital importation”.

The bank also issued eight CCIs of $58.359 million in respect of foreign exchange sourced locally, as shareholders’ loan, violating the rule which stipulates that CCIs should only be issued on capital imported.

Like Standard Chartered Bank, it also issued eight CCIs for capital inflows in form of machinery outside the 24 hours regulatory requirement of receipt of shipping documents, as well as that of letter of indemnity to the CBN against double remittance in respect of 20 CCIs transferred.

In all, Stanbic IBTC Bank caused $2.632 billion to be repatriated on the basis of the illegally issued CCIs, hence it was ordered to refund the amount to CBN with immediate effect.

But a source at Stanbic Bank told The Guardian that sequel to the order by the CBN to pay a fine and refund the illegally repatriated funds, engagements with the regulator to restate the bank’s sides of the matter have begun.

According to the source, the bank said that the engagement had become necessary as they still claim that the apex bank vetted and approved the transactions in question.

For Diamond Bank, it remitted $348.914 million as dividend to MTN Nigeria offshore corporate shareholders without any documentary evidence of the audited account of the company to justify the basis of the payment of the dividend declared and paid.
This action is a violation of the provision of Memorandum 24(4)(b) of the Foreign Exchange Manual.

It also issued three CCIs outside the regulatory 24 hours, without the approval of the CBN, and illegally remitted $352.222 million on behalf of Standard Chartered Bank and Stanbic IBTC.

Citibank Nigeria Limited followed the bandwagon, as four of the CCIs it issued, which evidenced the inflow of capital imported as cash, were outside the period of 24 hours allowed by regulation upon the receipt of inflow.

The bank also failed to comply with extant regulations on the issuance of letter of indemnity to the CBN in addition to forwarding the transaction history of the CCIs to the apex bank. CBN said the bank purchased $535 million on the basis of photocopies of a document bearing the name of Standard Chartered Bank as the applicant bank and the referenced CCIs.

In all, about $1.766 billion was repatriated by the bank on the basis of the illegally issued CCIs, which should be refunded to the coffers of the CBN with immediate effect.