Daily Archives: October 13, 2009

FG admits to illegal diversion of N4trn federation account fund

The Federal Government yesterday admitted before the Supreme Court that its operation of the Federation Account between 2004 and 2007 was largely illegal, being not in conformity with the provisions of the 1999 constitution. The Federal Government, had, for instance, diverted certain revenues, in excess of N4 trillion, which ought to accrue to the Federation Account for sharing among the three tiers of government during the period.

The Federal Government had labeled such monies as independent revenues of the Federal Government which a total 27 states of the Federation, as at yesterday, kicked against.

Some of the revenues allegedly diverted illegally by the Federal Government include proceeds from signature bonus, dividends from the Nigerian Liquefied Natural Gas Company Limited (NLNG), sale of government properties, privatisation proceeds, education tax proceeds, dividends and other Internally Generated Revenues (IGR) of federal ministries, parastatals and agencies.

Besides, the government had, since 2004, also diverted whopping sums of monies which ought to accrue to the Federation Account to maintain excess crude savings account and had unilaterally used the account to fund federal projects.

The Federal Government had also unilaterally ceded 4% of the revenue accruing to the Federation Account from non-oil taxes since 2005 to the FIRS and 7% from customs and excise collection to the Nigerian Customs Service (NCS).

The percentages so ceded are annually deducted upfront and paid monthly to the FIRS and NCS contrary to provisions of section 162 of the 1999 constitution.

From 2005-2007, a total N99 billion was withheld from the Federation Account for this purpose.

The 27 state governments which are presently before the Supreme Court to seek its order compelling the Federal Government to refund them their share of all the monies illegally diverted are also contending that the tax waivers and exceptions granted by the Federal Government amounted to expending revenues which ought to accrue to the Federation Account.

But the Office of the Attorney-General of the Federation which admitted yesterday that the Federation Account was largely operated in breach of the 1999 constitution said there was no need wasting the precious time of the court to litigate on such issues, having consented that it was illegal.

The government said in line with the rule of law paradigm of President Umaru Yar’Adua administration, all that mattered now was to address issues of fiscal federalism which can advance the cause of constitutionalism.

But it pleaded with the apex court to give it till January 18, next year, to finalise with the aggrieved state governments on how it intended to refund their shares of the illegally diverted public funds.

Chief Chris Alege (SAN) was the lead counsel who represented the Attorney-General of the Federation in the case yesterday.

Although Chief Adegboyega Awomolo (SAN) who is the lead counsel to about 15 of the aggrieved states had requested for just four weeks to get the endorsement of all parties to the case, Alege had said that giving them up till January 18 next year will help them to agree finally on the areas in which they had reached consensus for out-of-court settlement.

He said the long adjournment will also enable them to prepare their briefs on the areas both parties could not resolve amicably.

But both Alege representing the Federal Government and Chief Awomolo (SAN) did not give details of the consensus they had reached on the issue in the court yesterday.

However after proceedings in the case yesterday, both senior counsel spoke with Vanguard exclusively on the issue.

According to Alege (SAN), he said they had reached an agreement on some of the constitutional issues tabled by the states for the pronouncement of the court.

He said that there were however two areas in which they were yet to reach an accord.
He gave the two issues to include the education tax and the proceeds from sale of Federal Government properties.

He said both parties had already agreed to refer the areas they could not reach consensus on to the Supreme Court for its pronouncement.

Chief Adegboyega Awomolo (SAN) on his part told Vanguard that series of meetings were held before yesterday, saying the last of which held on September 8, 2009 at the Conference Room of the Minister of Finance.

He said that at the meeting, the report of the Harmonisation Committee was considered with far reaching recommendations made by the technical committee.

He said that presently, “consensus has been reached on six issues namely excess crude account, signature bonus (subject to treatment of backlog and the Federal Government concern on future funding of PTDF), cost of collections, waivers and concessions, other dividends and internally generated revenue (subject to treatment of backlog) and the Central Bank of Nigeria charges.”

He said conditional consensus (subject to the ascertainment of sources of funding for acquisition and treatment of backlog) has been reached on three issues including NLNG dividends, proceeds from sale of government properties and privatisation proceeds.
He concluded by saying that there is yet no consensus on Education Tax.

He said the agreement is to refer this issue to the Supreme Court for interpretation of the Education Tax Act in the light of section 162 of the 1999 constitution.
Explaining further, Chief Awomolo (SAN), said part of the recommendations agreed upon by both parties are:

•That the provisions of section 162 (1-10) of the 1999 constitution is the basis and the authority for the operation of the Federation Account

•That the operation of the Excess Crude Account during the period 2004-2007 was inconsistent with section 162 of the 1999 constitution

•That the impending review of the constitution should feature a proposal to provide appropriate legislative backing to the operation of the Excess Crude Account without prejudice to the FRA 2007

•That the sum of $8.425 billion deducted from the Federation Account for the NIPP should be converted to equity contribution with a caveat that NIPP should be properly incorporated as a company; assets acquired by the company should be clearly stated and identified and the shareholding of stakeholders should be clearly spelt out and this will form the basis of allotment of shares in the company to be backed up by shares certificates in the name of states and individual local government councils.

•That the sum total of $250 million deducted from the Federation Account for modernization project of the Nigeria Railways should be converted to equity contribution

•That the $80 million invested in the equity of the Ibom Power Plant should be shared amongst the federating units and shares certificates issued to them individually

•That the CBN should refund 75% of the commission charged on the Paris Club debt exit to the Federation Account and pay it into the Federation Account for distribution to the states

•That henceforth, all revenues from signature bonus should be paid into the Federation Account as contained in the FIRS (Establishment) Act 2007

•That to deal with claim for backlog of signature bonus, how much is in the PTDF Account should be ascertained, ascertain the amount required by PTDF to meet its funding obligation for 2009 and transfer the remaining balance into the Federation Account for sharing

•That the FGN’s equity in NLGN should be treated as an asset of the Federation Account and the dividends so far received should be paid into the Federation Account if it is found that the funds used for investment in the company was from the Federation Account asset among others.

It would be recalled that about three states of the Federation spearheaded the on-going legal battle with Oyo state at the vanguard.

As at today, 27 states of the Federation have so far filed papers seeking for similar reliefs.

It is the case of the 27 plaintiff states that the Federal Government breached the provisions of the 1999 constitution by so diverting and withdrawing monies that should have constitutionally stood to the credit of the Federation Account for onward sharing among the three tiers of government in the country.

According to the plaintiff states, the funds were illegally used to finance Federal Government projects like the power and railway projects, Federal ministries like the Federal Inland Revenue Services and the Nigerian Customs and to service the debts owed by the Federal Government against the Paris Club.

In their lawsuits, the 20 states of the Federation are praying the apex court for an order compelling the Federal Government to refund to them all the said monies illegally diverted between 2004 till date with interest.

For instance, Oyo government alone has summed up the total amount it was allegedly shortchanged between 2004 and 2007 by the Federal Government as N97.2billion.

The various writs already filed before the courts by different states of the Federation were filed by a team of seasoned legal practitioners.

Oyo State’s writ of summons was filed by a team of tested legal practitioners including Chief Adegboyega Awomolo (SAN), Yusuf Ali (SAN), Dr Konyinsola Ajayi (SAN), Prof Yemi Osinbajo (SAN), Chief Chris Uche (SAN), Dr Akin Onigbinde, Prof Akinseye George and Ogunmuyiwa Balogun.

In the Oyo writ, the state government is contending that between 2004 and 2007, several monies that ought to be paid into the Federation Account were unconstitutionally diverted by the Federal Government to finance projects unknown to the constitution.

The state also said that, at times, such monies were also diverted into accounts like the Excess Crude Account, which are unknown to the constitution.


Bank crisis: FG pumps $2bn into economy


THE National Economic Council (NEC), on Tuesday, approved that $2 billion, about (N300 billion), be released from the excess crude money into the economy to tackle liquidity crisis, which arose from the inability of the commercial banks to lend enough money since the banking reform began.

The excess crude money belongs to the three tiers of government and the approval gave legal backing to an earlier directive by President Umaru Yar’Adua to the finance minister to release the money.

Briefing State House reporters after the NEC meeting, Minister of National Planning, Dr. Shamsudeen Usman, said the NEC gave the approval for the release of the money which would be shared by the three tiers of government next week.

He said the president was worried that since the reform began, commercial banks were finding it difficult to lend money to loan seekers and that the situation was creating a squeeze in the economy.

The NEC team that briefed reporters was led by Imo State governor, Chief Ikedi Ohakim. The council also commended President Yar’Adua for the success so far recorded in the implementation of the amnesty package for Niger Delta militants and assured the Federal Government of its support in the implementation of the remaining stages of the amnesty.

Dr. Usman also disclosed that a draft copy of the Vision 2020 document was presented to the NEC, adding that it would be given to the Federal Executive Council next week for approval.

Another matter discussed by the council, chaired by Vice President Goodluck Jonathan, was complaints from some state governors about deductions from their statutory allocations for the repayment of the Paris Club debt.

According to the minister, satisfactory explanations were given to the affected governors on the deductions. Meanwhile, the arraignment of the three bank chiefs removed from office last Friday may not come soon.

The managing directors of Spring Bank, Bank PHB and Equitorial Bank were sacked on Friday last week. According to the Central Bank of Nigeria (CBN) Head of Corporate Affairs, Mr. Mohammed Abdullahi, the apex bank was yet to report any of the sacked bank CEOs based on the latest audit report to the Economic and Financial Crimes Commission (EFCC), adding that CBN as a regulatory agency, had a working relationship with EFCC and other law enforcement agencies and issues of such nature were treated in the normal way.

Abdullahi explained that if the CBN suspected serious infractions in any of the banks, it would provide information to the appropriate authorities to investigate and possibly prosecute the suspects.

He denied insinuations that CBN was treating the outcome of the recent examination differently from the one carried out in August, which saw five bank chiefs losing their positions.

He explained that all the banks in the country were treated the same way, adding that the same criteria were employed for the special examination in all the banks. “These criteria were: liquidity, capital adequacy, and corporate governance. The only difference is that the examiners found different things in the 24 banks, necessitating different actions.“

Abdullahi could not really state whether the apex bank would publish the names of the bad debtors of the newly affected banks, stating that the CBN was concerned about helping all the five new banks with capital adequacy issues in their loan recovery efforts, just as it did with the first five.

On why certain managing directors of certain banks were not removed despite widespread suspicions against them, he said CBN used the same criteria to evaluate all the banks, and acted on its findings, adding that the apex bank was not after any institution or any individual.

“CBN is not led by sentiments. Rather, CBN is guided in its actions by how the various institutions performed against the stipulated criteria.” Meanwhile, the CBN has also denied claims that it had convened a meeting with the CEOs of the 24 Deposit Money Banks (DMBs) and oil sector operators for tomorrow on issues affecting the banking reforms and the economy, stressing that no such meeting has been slated.

The Senate’s invitations to the CBN governor, Sanusi Lamido Sanusi; Chairman of the Economic and Financial Crimes Commission (EFCC), Mrs. Farida Waziri and the Attorney General of the Federation, Michael Aondoakaa, to appear before it on Tuesday was postponed till another date as the trio were conspicuously absent.

This was sequel to the ongoing World Bank conference at Istanbul, Turkey, which Farida and Lamido are currently attending. The Senate President, David Mark, announced during the plenary session that those invited had sent in letters to the Senate requesting that the date should be shifted.

The Senate, last week, had summoned them to come and explain the current crisis in the nation’s banking sector. The apex bank, through its governor, Mr. Sanusi, sacked the managing directors and executive directors of five banks, namely FinBank, Oceanic, Intercontinental, Union and Afribank, on account of alleged unprofessional conduct.

However, at the resumed sitting of the Senate after two months of recess last week, Senate President noted that since the episode occurred while the Senate was on recess, it was necessary that they be briefed to enable them to take informed decision on the matter.

He noted that since the matter was already in the court of law, the functionaries should be invited to brief the Senate behind closed doors. According to him, “this is not to be discussed in the open, but, we will invite them to brief us at a closed session.”

North moves to take control of banks

Source: The Nation

The North has launched fresh moves to seize the current fallout of the reforms in the banking sector to significantly increase its shareholding in the sector. The move by the North was part of the resolution at its recent meeting held in Kaduna which communiqué was not released to the public.
However reliable sources at the meeting told The Nation  that the meeting decided on a comprehensive mobilisation of its elites towards taking control of a chunk in the banks’ shares. To achieve the dream, the Arewa Consultative Forum, ACF’s National Working Committee, NWC has set up a committee to implement the plan.

The Nation reliably gathered that the issue was part of the main agenda during the ACF National Working Committee’s last two meetings in Kaduna .

An aspect of the resolution obtained by our correspondent stated: “On issues concerning the banking sector, the (ACF) chairman stated that a committee was set up by the National Working Committee in order to address the issue. It stated that ‘the North must take advantage of any opportunity of acquiring equities in the banking sector.”  The decisions were contained in a resolution reached at the end of its July 1 meeting and signed by ACF’s chairman, General I.B.M. Haruna (rtd) and its Secretary-General, Colonel Musa Shehu (rtd). Another meeting held on September 30 also reaffirmed this position. The Nation learnt that more rigorous discussion of the issue took place at the September meeting.

The meeting presided over by General I.B.M. Haruna (rtd) exhaustively discussed issues surrounding mobilization of northerners for decisive investment towards acquiring worthwhile equity holdings in the banking industry. 


According to insiders, the ACF NWC whose members have met the Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi were impressed with current efforts to sanitize the banking system.

There have been accusations that the recent shakeup in the banking industry was aimed at strengthening the North economically, but the ACF Publicity Secretary, Anthony Sani has continued to deny any Southern agenda. He has expressed anger over speculations in the media seeking to imply that influential citizens of northern origin helped scuttle several banks so that northern interests can acquire them.

Sani said: “What we have been saying is that since the last banking industry consolidation exercise, it has become glaring that the North does not have a bank it can call its own. The only two ways of redressing this are either by raising your own N25 billion bank to start a bank or buying shares in any existing bank.

“The issue of concern in the North is all about mobilization of capital to start and develop businesses. Because of peculiar collective needs, we have to begin processes that will bring about investment in businesses,” Sani told The Nation on telephone last Friday.

The Nation gathered that some former state governors, including Alhaji Saidu Barda, Col. Hamid Ali (rtd), Col. J.I.P. Ubah (rtd) and others such as Brigadier-General M.A. Umar, Justice Yoonus Abdullahi, Alhaji Mohammed Kumo, Lt-Genenaral Jeremiah Useni (rtd), Alhaji Dauda Birma, Brigadier –General Abba Kyari (rtd), Lt-Gen. Mohammed Inuwa Wushishi, Maj. General Muhammadu Shuwa were among those at the meeting.

Sani explained that the body’s NWC deliberately decided not to issue any communiqué or disseminate discussions which took place at its September 30 meeting. He asserted that the meeting was more of a review and continuation of previous discussions on economic development issues.

According to Sani, ACF has no need to exploit access to any influential government officials to facilitate its agenda for increased participation of northerners in their country’s banking industry.

Our correspondent gathered that the ACF also did an analysis of the nature, effect and prospects of the dying textile industry in the northern states, especially in view of the N70 billion Textile Development Fund which the ACF leadership sees as a mirage that is not likely to become actualized by the Federal Government.

Another major issue discussed was the anxiety being generated by evolving patterns of kidnapping which the North had never experienced before.

The sources further disclosed that a special paper presented at the September 30 meeting by one Hajia Fati Ibrahim gave ACF NWC members a comprehensive analysis of how inadequate financing options, outdated equipment, erratic power supply, lax regulations and other problems have ensured worsening unemployment and economic impoverishment across northern states.

“Some members expressed the view that the Presidency can do more towards discouraging smuggling.” A source stated.

Following discussions on how utilization of the N200 billion Commercial Agricultural Credit Scheme can boost development in various states, ACF’s NWC resolved to present a position paper on the issue to the Minister of Agriculture, Dr. Sayyadi Abba Ruma.

They further discussed other issues including the need for northern states’ governors to encourage micro finance banks along with the incessant violent conflicts and security threat caused by migration and desert encroachment in the largely arid North.

Banks have contributed to corruption in the ports

Source: Vanguard

Nigeria banks defraud government of several millions of naira by holding back revenue which is supposed to be paid to government. Shittu, who is also the Chairman, Committee on Public Relations of the Council for the Regulation of Freight Forwarding of Nigeria, CRFFN, expressed worry that despite the abuses of the banks in this regard goes unreported in the media.

Banks have contributed to corruption in the ports – VANGUARD

Commercial banks in the country have been accused of contributing to the high level of corruption in the maritime sub-sector through abuse of form “M”. Speaking at a one day sensitization seminar tagged: The Economic Imperative of Reviving Eastern Ports, Managing Director of Skelas Nigeria Limited, Prince Olayiwola Shittu, said the transfer of the Form “M” function from Customs to the banks have not helped matters.

He said that there had been situations where the banks defraud government of several millions of naira by holding back revenue which is supposed to be paid to government. Shittu, who is also the Chairman, Committee on Public Relations of the Council for the Regulation of Freight Forwarding of Nigeria, CRFFN, expressed worry that despite the abuses of the banks in this regard goes unreported in the media.

He also blamed the actions of SGS, the destination inspection agent responsible for Port Harcourt port for the movement of importers from there to Lagos occasioned by sharp increases in port charges.

He explained that they (SGS) not only jack up the charges of the freight of cargoes but also the value of such goods. The Skelas boss commended maritimes journalists for organising the forum, saying there is need for government to take a critical look at the issues raised and ensure that deliberate efforts are made to improve maritime activities at the port.

Also speaking at the seminar, a maritime expert, Mr. Adeleye Ajayi, charged the Federal Government to work at exploiting the economic potentials of the eastern ports for the benefit of people, as well as reducing the restiveness in the Niger-Delta region.

The continued neglect of the eastern port has contributed in no small way to the restiveness in the region.
Ajayi said that the economic benefits of full exploitation of ports in the eastern part to the federal and state governments as well as the various communities in the region cannot be over emphasised.

The problems that needed to be tackled immediately to achieve the above desire according to him, are, “Militancy, problem of pilotage, shallow navigational channels and bad roads.”

He said “it is therefore a matter of urgency that the Federal Government should find a logical solution to the issue of militancy by ensuring that adequate infrastructure are made available to the communities. Government should also resolve once and for all the problem of ship pilotage along the Delta creeks.”