The current controversy over the alleged missing $20 billion oil money and over N600 billion allegedly paid as subsidies on kerosene has put the role of banks as intermediation agents under scrutiny, with some analysts calling for independent forensic audit to throw more light on the matter.
The analysts are of the opinion that the controversies further tend to erode confidence in the financial institutions feared to have played ignoble roles in the transactions, as they argue that the funds could either have been stashed in the vaults of some banks or repatriated overseas with their assistance, if the proceeds of the sale of the crude oil were initially repatriated into the country.
BusinessDay investigations also show that some of the banks exposed to some distribution companies (Discos) are jittery over the continued pressure on the naira against other currencies, with the likely devaluation of the naira at the next Monetary Policy Committee (MPC) meeting in two weeks time.
This is because some of the Discos have not started making profit to commence the servicing of the dollar-denominated loans due to poor due diligence and revenue-generating potentials of the assets.
The analysts, including Hussaini Mohammed of Muregi Associates, Abuja, Bismarck Rewane of Financial Derivatives Company, Lagos, and Samir Gadio of Standard Bank, London, are of the opinion that the current development poses a lot of moral burden on the financial institutions, which are supposed to be epitomes of trust and confidence.
But Olaf Schmueser, senior representative, Commerzbank Nigeria office, Lagos, told BusinessDay yesterday at the bank’s investment banking conference that although they were watching as events unfolded in the industry, Commerzbank would continue to partner with the local banks in the area of trade financing and loans.
“The unending missing money volcano at the NNPC is about to erupt, while the kerosene subsidy mess makes an independent forensic audit now inevitable,” said Rewane, who also spoke with BusinessDay on the sidelines of the Commerzbank investment banking conference in Lagos on Tuesday.
He added that only the setting up of an independent forensic audit would resolve the issues that are impacting negatively on the economy.
“The independent forensic audit will unravel the roles played by all the parties involved, as nothing short of this will be credible,” he said.
Forecasting further decline in foreign reserves, Rewane sees a mixed bag of outlook for March, with the possibility of the MPC allowing the naira slide 3 percent, pushing up the Cash Reserve Ratio (CRR) to 100 percent, and external reserves ebbing at $38 billion before creeping up to $40 billion in May.
Mohammed, former director, Nigeria Deposit Insurance Corporation (NDIC), who said it was normal for banks to feel jittery having realised the role played, further said “it may be difficult to directly trace some of the alleged missing funds to the banks because such funds are hardly left or kept in the vaults of the banks for obvious reasons”.
“While the recent modest recovery in bank stocks may indicate that the market believes hikes in the CRR are now somewhat less likely, downside risks potentially stem from the level of foreign currency exposure in the sector and FX mismatches in the loan book of selected institutions,” said Samir Gadio, emerging markets strategist, Standard Bank, London.
Speaking further, Mohammed said: “It’s absolutely normal for the banks to be jittery for many reasons: current situation at CBN, direction of naira vs dollar exchange rate scenario and the general economic direction of the country appears to be anybody’s guess. Most importantly, whatever the Discos claim to have, they don’t have it and, above all, their projections are wrong.”
But providing a scenario, Rewane raised a poser: “What if the money did not come to Nigeria? It is possible that the crude left the country and sold there and they decided to keep the money there overseas. The only way out is forensic audit.”
Despite the development, some foreign correspondent banks have resolved to continue their relationship with local banks in the area of credit lines and trade finance. “For instance, we gave a loan of about $180 million for general purpose to FCMB recently,” said Schmueser.
JOHN OMACHONU
