TSA Scandal: Aggrieved banks to sue whistleblower

TESLIM SHITTA-BEY|

Anxiety that rose in financial service circles last week over speculations that the Central Bank of Nigeria was preparing to withdraw about $793 million dollars (N242 billion) from the coffers of seven local banks for their non-remittance or ‘hiding’ of Treasury Single Account (TSA) funds belonging to the federal government has proven to be untrue. Indeed Business Hallmark investigations suggest that the seven banks alleged to have concealed monies belonging to the federal government are currently preparing to collectively sue the supposed ‘whistle blower’ that took the matter to court.

On further investigation, this newspaper gathered that a lawyer wanting to take advantage of the federal governments whistle blower act decided to use outdated information gathered by him concerning the status of monies belonging to the federal government in the coffers of the mentioned banks to obtain the reward promised whistle blowers on verification and recovery of looted, hidden or misappropriated funds.

In this case the lawyer, apparently, relied on information given to him after the funds had left the respective banks and had been deposited with the Central Bank of Nigeria (CBN) as far back as the second quarter of 2016. Indeed some of money mentioned had been remitted to the CBN since August of that year. A chairman of one of the banks affected who did not want his name in print, as the matter was still a subject to ongoing investigation noted that, ‘even the Central Bank of Nigeria was taken aback by developments, as they noted that they were the principal institution that could say whether or not particular banks were in violation of TSA remittances and that so far they do not have such data’. In an unofficial discussion with contacts in the CBN Business Hallmark gathers that the amounts claimed by the whistle blower to be within the seven banks as unremitted revenues of government were not true. According to our source, ‘if any institution should know the status of unremitted TSA monies with the banks it should be the CBN and so far we have not seen such huge amounts kept on the books of any of the banks. The days of clandestine commercial bank accounting are over and done with, they are dead and buried’, he said authoritatively.

Senior officials of both the Accountant General and the Attorney General of the Federation offices are working with the CBN to sort out the mess and establish the true situation of the banks and their TSA remittances, but preliminary reviews indicate that the seven banks mentioned do not carry such liabilities on their operating balance sheets.

According to papers presented to a Federal High Court in Lagos the banks affected by the allegation are United Bank for Africa Plc, Diamond Bank Plc, Skye Bank Plc, First Bank Limited, Fidelity Bank Plc, Keystone Bank Limited and Sterling Bank Plc.

The High Court’s judgment of temporary remittance of the funds alleged to have been hidden by these banks threw the financial service sector into confusion and caused a stir in the interbank market as banks not mentioned in the case tried to hedge against the adverse counter party risks of the court order given by vacation judge, Justice Chuka Obiozor.

Withdrawal of the money from the banks would have been equivalent to removing 1.4 times the collective statutory share capital of the seven banks or  what equally amounts to ten times the recent (2016) profit before tax of first bank holding company (FBNH), or 89 per cent of UBA Plc’s operating income for last year 2016.

Analysts have noted that FBNH is the most liquid bank in the financial system currently (with a liquidity ratio slightly above 50 per cent) and a capital adequacy ratio of 18 per cent removing the purported TSA money from its books would definitely have hurt the money lender but it would not have proven fatal. The same could not have been said of Diamond bank. Removing $174.4m (or N53billion) from its coffers at the moment would damage the banks financial stability very sorely. The same would also be true if a whopping $40.7m (N12.4billion) were to be removed from the tills of sterling bank and $16.7million (N5.1 billion) walked out of the doors of key stone bank. These three banks in particular with the addition of Skye Bank Plc would have found themselves in terrible balance sheet situations.

According to Oluwasegun Atere, head portfolio management at investment house, Imperial Finance and Trust, ‘liquidity could have been seriously compromised if these banks had actually had to return such huge amounts of money to the federal treasury, a few of them have already been skating on thin ice, so if they were made to give up additional billions of naira, they could have found themselves floating in fiscal iceberg’.  Says Atere, ‘the key to healthy banking is liquidity if that goes then trouble becomes spelt in capital T’.

Nevertheless, virtually all seven banks alleged to have hidden federal revenues have, in a series of individual press communiqués, insisted that they had not in any way hidden any money due to the fiscal authorities and that they were certainly not in violation of the TSA Act.

In a statement released by First Bank of Nigeria’s Group Head Marketing and Corporate Communications, Mrs. Folake Ani-Mumuney, the bank stated that, ‘First Bank has no hidden TSA funds in its books. First Bank wishes to categorically state that it does not hold any funds due NPDC and NNPC that are TSA eligible as carried in recent media reports as the Bank has since transferred all funds due to the TSA accounts in compliance with the policy directive. First Bank remains a compliant institution and always abides by all extant regulatory rules and regulations.’

In its own swift response to the festering issue Fidelity Bank Plc through its Divisional Head Brands and Communications, Mr. Charles Aigbe, also released a statement on Friday 21^st July 2017, in which the bank firmly stated that, ‘Our attention has been drawn to media reports stating that Fidelity Bank illegally concealed $24.5m in contravention of the Federal Government’s Treasury Single Account (TSA) policy, citing court papers filed by the Office of the Attorney-General of the Federation at the Federal High Court in Lagos today.

Please note that at the commencement of the TSA policy all TSA related accounts held by the bank were fully disclosed to the authorities. We do not have any TSA related account with a balance of $24.5m in Fidelity Bank which has not been remitted to the authorities.

This matter is coming to us as a surprise. We are therefore reaching out to the Office of the Attorney-General of the Federation to ascertain which account or parastatal they are referring to with a view to carrying out a detailed reconciliation.’

In its own reaction to the unfolding TSA story, Sterling Bank through its Chief Marketing Officer, Brand Management & Communications Group, Mr. Henry Bassey asserted that, ‘our attention has been drawn to reports in certain online publications of an order by the Federal High Court sitting in Lagos on Thursday 20th July 2017 mandating Sterling Bank Plc to remit the sum of US$46.5m (Forty Six, Million, Five Hundred Thousand United States Dollars Only) to a designated Federal Government Asset Recovery Account with the Central Bank of Nigeria. The sum in question supposedly represents undisclosed qualifying funds under the Federal Government’s Treasury Single Account (TSA) policy illegally kept by the National Petroleum Investment Management Services (NAPIMS) and Nigerian Petroleum Development Company (NPDC).

We wish to state unequivocally that Sterling Bank does not hold any sum in any currency as a deposit from either of these entities.

We have therefore written formally to the Office of the Accountant General of the Federation (AGF) demanding a clarification of this claim and a correction in the interest of the general public.’

Two other banks UBA Plc and Skye Bank Plc also in separate releases denied owing money to the federal government by way of withheld or undeclared remittances to the TSA. In other words virtually all the banks associated with last week’s Lagos Federal High court judgment concerning unremitted TSA sums have insisted that they do not hold such money on or off their known books.

Apparently the recent aggressive posture of government towards revenue leakages relates to a need to find the resources to fund the massive N2.7 trillion projected budget deficit for the year 2017. The fiscal authorities are worried that the potential for oil prices in the international market could severely damage the income hopes of the budget office and finance ministry hence requiring a backup funding option for the budget which would see the administration achieve at least an 80 per cent revenue performance. This has become even more important when viewed against a recent statement by the finance minister (although she has since done a volte face after political pressure) that the economy had reached an external borrowing limit.

Given the quick denials by the banks recent anxiety expressed by bank owners and depositors may have cooled as the offices of the Accountant General and Attorney General of the Federation, CBN and the commercial banks reconcile their ledgers.