The subject of the narrative, in this column, last week, was the $7bn which Festus Odoko, a former Central Bank of Nigeria Corporate Affairs Director, confirmed had been deposited with 14 Nigerian banks in October 2006. It is not clear how many banks, actually, succeeded in raising the mandatory capital base of N25bn, and the additional N35bn steep threshold, required to manage part of Nigeria’s foreign reserves. Nevertheless, on hindsight, the CBN might have quietly dropped this clearly ambitious requirement so as to pursue its declared agenda.
Regrettably, despite several promptings in repeat publications of the above title by this writer since 2006, the CBN management remained inexplicably, and taciturn to any request to confirm the status of the $7bn placed with Nigerian banks, without collateral, equity participation or profitable return after 13 years!
Lately, however, the Chairman of the Special Presidential Panel for Recovery of Public Property, Mr. Okoi Obono-Obla, noted in a NAN report, in Abuja, on September 7, 2018, that these banks have not repaid the $7bn to government’s treasury “after 13 years.” Curiously, according to him, “when we enquired from the CBN the state of that money, the banks told us that the money was ‘dashed’ to them.”
Consequently, upon the presidential panel’s request, the Economic Financial Crimes Commission ultimately invited Dr. Obadiah Mailafia, a former CBN Deputy Governor, to shed light on the controversial $7bn ‘gift’ to banks, when Chukwuma Soludo was the CBN Governor in 2006. It is a story of how hapless Nigerians may have been insensitively betrayed when the CBN dashed $7bn of scarce forex to 14 banks, even when the apex bank and the same government were already neck deep in debt to these bankers.”
Below is Mailafia’s testimony, which was published in BusinessDay edition of 24/1/2019. Please read on.
“On request from the Federal Government of Nigeria, I was seconded from the African Development Bank Group as Deputy Governor of the CBN in May 2005. I left a highly paid and pensionable post as Chief Economist, Planning and Budgeting, to serve at the CBN at a much lower salary. I have always believed that serving one’s country is one of the noblest tasks anyone could be called upon to do.
In early October of 2006, the then Governor of the CBN, Prof. Chukwuma Soludo, brought a proposal to the Board to the effect that he wanted 14 of our commercial banks to take part in the management of our external reserves in partnership with foreign banking associates. He explained that it was rather unfair that only external custodians such as J. P. Morgan, Goldman Sachs and others were having a piece of the action. At the time, we were feeling rather triumphal. The banking reforms had been a success. We had managed to reach a deal with the Paris Club of international creditors. The economy was booming. Our foreign reserves had grown from a lowly US$10bn in 2004 to an impressive US$38bn in 2006… We had just launched the FSS2020 project which aimed to position our country as the financial hub of the continent by 2020.
As I recall, there was a lively debate on the matter. On the face of it, it seemed a good idea to allow our banks to have experience of managing our external reserves as a means of socialisation into the complex world of financial engineering and global financial markets. I had a modicum of doubt, but, alas, could not voice it. The professor was a Mister Know-All with an ego of the Order of Lucifer. The Curse of Mephistopheles.
Moreover, he always brandished his closeness with Aso Villa to neutralise any dissent. There was a whispering campaign about me being ‘the black sheep’ that would not play ball…
At the end of the day, the majority carried the day with regard to local participation in foreign reserves management. I must emphasise, for the avoidance of doubt, that at no stage did anyone get even the remotest impression that it was meant to be a loan, bailout or forbearance.
Of course, it would be another matter entirely if the banks, as an afterthought, after more than a decade, would now prefer to give a different interpretation to that financial deal. This should be confirmed from the archival records of the CBN. The banks had a mandate as fund managers of the US$7bn that was distributed to them; of which principal and interest were to be returned within the agreed tenor. But I was not privy to those details.
On March 26, 2007, while busy at my desk in the early afternoon, news came on national radio that I had ceased to be the deputy governor and had been moved to the Presidency to a 419 position as Special Adviser to the President on Political Economy. I resigned myself to the will of God. I had worked alone in the office up to midnight of December 31, struggling to meet the IMF liquidity targets set for us under the Special Support Instrument. Unfortunately, my colleagues deliberately sabotaged me. That may have explained my unceremonious departure. I later got to know that the late President Umaru Yar’Adua, having studied my dossier, had instructed that I be reinstated immediately. Unfortunately, that same week, he went into coma, never to recover. His presidential directive was never obeyed.
I mention these events in order to explain that, from October 2006 when the reserves were allocated to 14 banks, up to the time I left in March 2007, was only slightly over five months. The Directorate for Economic Policy which I headed is the most important function of any central bank, but it is the one Directorate where we do not handle money. We work with computable models for monetary policy while undertaking research and statistical-analytical work to drive economic development.
I was therefore surprised when, two weeks ago, a friend in the security services sent me a circular emanating from the Villa in which my name had been included on a list of 30 people slammed with a travel ban under Executive Order No. 6. Dated 11, December 2018. I managed to trace their office to a sprawling nondescript building in the outskirts of Asokoro. There, I met a squadron of investigators who gleefully welcomed me as a new captive. I was detained for questioning for the whole day and had to fill wads upon wads of paper about a “missing US$7 billion dollars” during my time at the CBN…’
Without prejudice to the ongoing investigations, my position is that whatever monies that were given to banks to be managed on behalf of the CBN, must be returned with principal and interest. I feel duty (bound) to share with the panel all that I know about this case. But I will first affirm my legal rights to be treated above board as a witness rather than suspect.
The way I have been treated so far evokes bitter memories. My time at the CBN was one of the worst in my entire professional career. I was to discover only after I left that my coffee was doused with poison on at least three different occasions.
I have spent most of my professional life outside Nigeria. I have enjoyed honours and privileges. My most recent job was as Chief of Staff of the 79-member African, Caribbean and Pacific Group of States in Brussels. I coordinated more than Є50 billion of development and investment funds. Throughout my sojourn abroad, I had no police record for a traffic offence, let alone financial fraud. It is a shame that I can be treated with such humiliation in my own fatherland. My family has paid a heavy price.”
COMMENT: Ultimately, however, even if there is no criminality in the $7bn gift to banks, there is clearly a good case, if refund is not feasible, for converting the $7bn, plus compounded interest, to significant equity in the respective banks.
END
Be the first to comment