Home Business Economy EOP 17: Corruption in corporate Nigeria: A regulatory failure (Part 1)

EOP 17: Corruption in corporate Nigeria: A regulatory failure (Part 1)



Anybody acquainted with the economic and business history of Nigeria would not be surprised by the recent financial crisis that engulfed Oando Plc, the leading local oil exploration and marketing company. It has happened so often to be predictable; the real surprise would be why it took so long to snowball. Oando was a disaster waiting to happen and that it did is a matter for regulatory query.

In sum, it is all about corruption and ethical misconduct – which is a form of corruption – that now pervades our society. It is naïve and indeed unrealistic to believe and think that corruption is only a public sector malaise and preoccupation. The truth is that it cannot be, given that the society is integrated and social behaviours are often cultural and psychological in nature and have demonstration effects. So overtime, what obtained in the public sector was invariably bound to rear its ugly head in the organized private sector because all Nigerians are in competition for the same social space.

Time there was when the private sector used to be seen as the bastion of integrity and ethical conduct and discretion. It was a time people like Shonekan, Ohiwerei, Abebe, Onosode, Ubeku, Asabia, Kolade, Oshunkeye, Sanusi, Omolayele, Giwa, Olashore, Ogundipe, and a host of others too numerous to mention, bestrode the boardrooms of major MNCs in the country; people who could look political leaders, even military juntas, straight in the face and call their bluff because there were no skeletons in their cupboards. It was a period the best graduating students in universities went to private sector to escape the politics and corruption of the public sector.

But that time had since passed and what is happening now was bound to happen; it was a lost battle even before it started. Corruption was enveloping the nation and it would have been unthinkable to expect the private sector to remain an oasis in the desert of moral and ethical decay and degradation forever. What may be surprising is that some people are actually unaware of this inevitability. It is Oando today but it does not mean that Oando is the only culprit; there is nothing unusual and uncommon about what Oando did. Most other corporate institutions are guilty of worse. Oando’s misfortune and tragedy is that it overreached itself and got caught. It will be the turn of another shortly.
It has happened so many times in the recent past that we should be looking at the issue differently; our focus should no longer be how it happened but why, because like what is happening in government, the how only addresses the effects rather than the root of it. Corruption in corporate Nigeria was thought to be a banking phenomenon with the cascade of bank failures in the mid 1990s until one of the biggest fish and the best of Nigeria’s corporate titans was caught in the web of unethical practice. By then it was a journey of no return.

Chief Rufus Giwa was a rare corporate guru with an intimidating stature and mercurial personality. He was an unofficial adviser to governments and travelled with the heads of state everywhere. At the time of his nemesis in 1998, he was the chairman/CEO of Lever Brothers plc (now Unilever) and towered like the cedar of Lebanon in the midst of shrubs. He was the first and only person to have held the presidency of Manufacturers’ Association of Nigeria, MAN, and NACCIMA simultaneously. But while he basked in the television light of public acclaim, something sinister and untoward was happening underneath.

‘This Present Darkness: The story of crime in Nigeria’ published posthumously recently by Steven Ellis, has chronicled the history and origin of corrupt behavior in Nigeria and situates it in one word: materialism. It was founded in the colonial period, nurtured by the political leaders and now reaped by the rest of us. However, materialism may not fully explain some of the manifestations of corruption and unethical behaviours particularly in the private sector. Some, like in this case, may be simply psychological – ego and pride.

He was cooking the books of the company and posting profit without cash backing, and holding inventory that should have been written off; it is a story that repeats itself in most of the others even in the Oando case. In the end the company took a N700 million loss – a humungous sum in those days and more than its annual profit for that year. I was in banking then and after the event, my boss, a man of their generation made a prophetic statement, to wit; this would be the last generation of Nigerians managing the MNCs. Such was the profound nature of the incident; he has been proved doubly right.

There was also the case of Mr. Bunmi Oni of Cadbury Plc, described at the apogee of his reign as “the quintessential professional” by the media. A protégée of two of the greats – Kolade and Onosode – he was at the time also the president of MAN. Like Giwa and others, it was hubris and the illusion of power and ambition that undid him. The company had made a hybrid public offer in 2003 that promised almost 40 percent return on investment at a time the economy was just emerging from prolonged economic crisis before return to democracy and low oil price.

As a Business Editor, I attended the presentation of the offer to the investing public at the Lagoon Restaurant; most analysts believed the forecasts were overly optimistic and practically unrealistic. It was evident that the management had bitten more than they could chew, and something must have to give eventually. Well, the PO was hugely successful but major investors preferred the convertible preferential shares to the ordinary shares. Preferential shareholders must be paid their coupon rate whether the company made profit or loss, unlike dividends. So finding money to meet up with payment became an immediate challenge, and they started cooking the books.

The case of these two people is instructive because they represented the best of the OPS at the time of their fall. The conclusion is; if the best were guilty of corruption or unethical practices, what about the rest; a fish starts to rot from the head.

As already stated, the banking sector was the purveyor of corporate corruption in the country dating even before independence, as most bank failures are products of corruption and Nigeria holds the African trophy in bank mortality. However, the most celebrated in recent times should be those involving Dr. Erastus Akingbola, Dr. Cecilia Ibru and Mr. Tunde Ayeni of Skye bank with over N2 trillion at stake. These three cases trump every other corruption case in Nigeria, making public sector corruption pales into insignificance. Of course, their banks paid dearly for it.

So the question arises; how could this level of abuse and financial recklessness be perpetrated in banks and publicly quoted companies over a period of time with all the regulatory limitations and oversights? Where were the regulators when these infractions took place and what is their level of culpability? For instance, the Oando case did not start in 2019 or even with Gwarzo; it dates back to 2016 and beyond; and yet nothing was done.

Next week: The case against regulators; contact: [email protected]