The Financial Reporting Council shot into public consciousness many months ago. A hitherto obscure body under the supervision of the Federal Ministry of Trade and Investment, the government of Goodluck Jonathan found it a useful tool when it sought to cut former Central Bank governor, Lamido Sanusi, to size.
Out of nowhere, the FRC emerged with an “audit” which it said it had conducted on the affairs of the CBN during the tenure of Lamido Sanusi. It turned out that the FRC had been accuser, prosecutor and judge in the very well-orchestrated case, but which the public easily saw through for the sham which it was. Reportedly, Sanusi did not even get to sight the audit report. By the time he saw salacious excerpts of the report on the pages of newspapers, his letter of “suspension” was already on its way to him. His tenure as CBN governor had ended unceremoniously.
The FRC cut the image of filth at the time and not a few people were saddened that the quasi-regulatory body would be deployed in such a manner to sack an employee of government.
Fast-track to a few months more and riding on the platform of change, a new government takes over the reins in Nigeria. Its leadership pledges that it would not be business as usual. Corruption, impunity and all of the vices that stifled and seemed to turn Nigeria into one massive jungle of “anything goes” would be systematically eliminated.
The FRC quickly re-jigs its strategy. It must wipe away the relics of its past and cut the impression of a “no-nonsense” people-oriented regulatory body, in order to catch the attention of the new leadership. Incidentally, it does not currently have a supervisory minister, neither does it have a board. It therefore practically functions as a one-man organization, with Jim Obazee, its executive secretary, calling the shots as chief executive officer. Many in the corporate world have wondered why the government has inadvertently placed such responsibility that may include corporate oversight in the hands of one man.
That fear has been vindicated by the recent proclamation by the FRC in which it says it has withdrawn the rights of certain directors of Stanbic IBTC Bank as well as its auditors, KPMG, to attest to any financial statements in Nigeria. In other words, acting alone, without a supervisory board, and without a supervisory minister, one man, the executive secretary of the FRC, has single-handedly striven to indict major internationally-rated multinationals operating in Nigeria. In the process, which analysts say is defective to say the least, he calls to question the issue of how serious Nigeria really is regarding attracting and nurturing foreign investment as a fillip to our economic growth and development aspirations.
On what grounds has this gentleman plunged Nigeria into this abyss of disgrace? A few shareholders had gone to town lamenting the payment of “technical” fees by Stanbic IBTC to its parent, Standard Bank of Africa. In their view, which could do with some enlightenment and education, Stanbic IBTC need not pay “technical fees” to its parent.
It would appear, however, that just like the Sanusi case, the FRC may have again lent itself to the use by shareholders within the Stanbic IBTC board to attempt to destroy the organization. Investigations reveal that the protest by a handful of minority shareholders against the so-called payment of “technical fees” has actually been orchestrated by two foreigners, erstwhile owners of the defunct Regent Bank, one of the legacy banks that now make up Stanbic IBTC. It is the two Indian gentlemen who previously fully owned Regent Bank who, for some reason, are driving the agitation and have craftily invited the FRC to help actualize the hatchet job of pulling the bank down.
Experienced corporate world players understand and appreciate that payment of technical fees, or franchise fees as the case may be, is common practice when dealing with multinational corporations. These are companies that have made investments across geographies and which also share assets – both tangible assets like skilled manpower and intangible ones like the brand name. Global practice is that just as the operating subsidiaries share the benefits of these assets, so must they share in the cost or liabilities. Technical fees or franchise fees are therefore very common practice that need not ordinarily evoke any controversy.
Interestingly, it is to the credit of the shareholders that the case had even been taken to court and is currently awaiting adjudication. What then is the rationale for the FRC to conduct without any supervision a one-man investigation and even circumvent procedure in publishing damaging “sanctions” on reputable institutions that have plied their trade on the continent for ages? The development is scary and calls for urgent intervention at the very highest quarters. Thankfully, ministers should be getting their portfolios in the nearest future and this episode should rank among the top priorities for the minister of Trade and Investment. Clearly, Nigeria is reeling from a situation where people, especially where they imagine that they are “saddled with power”, have yet to purge themselves of the instinct of impunity.
But another problem, perhaps an even worse one, is that in which regulators do not understand their mandates. They hardly understand that they owe a duty to the government, the consumer as well as the investor. They do not seem to appreciate that it is in painstakingly balancing out these interests that they can extract optimal value for the economy.
How much engagement has the FRC embarked upon with all the parties in this case? Has it even as much as engaged the regulator of the banking industry, the CBN? Has it engaged the Securities and Exchange Commission? Does it realize the damage in international investor circles and investor confidence its actions and pronouncements are causing Nigeria?
Unfortunately, the damage has since commenced. Reports indicate that since the misguided announcement by the Jim Obazee-led FRC the company’s share price has taken a plunge. During the week, a group of the bank’s shareholders called a press conference to complain that they were alarmed at how badly the FRC had managed the issue with the consequence that their investment was depleting by the day. Boniface Okezie, representative of the shareholders under the aegis of Progressive Shareholders’ Association of Nigeria, lamented that the FRC chose to disregard and follow due procedure as stipulated by the regulations. Specifically, he said, Regulation 27 of the Directorate of Inspection and Monitoring Guidelines clearly stipulates that where a legal entity disagrees with the views of the FRC regarding its published accounts, then the FRC may charge that entity to court. In full contravention of that regulation, FRC preferred to go to the media to make unfounded and spurious allegations against Stanbic IBTC and in the process endanger not only local but also off-shore investment as the organization is majority-owned by Standard Bank, a multinational bank.
The FRC issue is a strong imperative to the president and the legislature to step in and immediately halt the misuse of power by executives who have realized that they possess some power and are in position to malign organizations. It is even worse when such individuals are not functioning under the moderating influence of a board or supervisory minister. Like a malignant cancer, it is quietly but quickly spreading its toxicity across the corporate world. It needs to be halted.
Interestingly, the shareholders also called upon President Buhari to constitute the Board of the FRC, advising that “it should comprise experienced, honest and diligent Nigerians who are exposed to how corporations operate across the world”. Such a Board, it said, “will exert control and limit the excesses of the FRC which is currently run as a one-man-show by its executive secretary, Jim Obazee”.
There is an urgent imperative too to deploy a tested technocrat to the Ministry of Industry, Trade and Investment, said the shareholders. “This minister will also exert a controlling influence on the activities of the FRC and help ensure that the good intentions of government are not thwarted by the incompetence and lack of exposure of publicity-seeking egocentric professionals,” said the angered shareholders.
Smart Adekunle
