Analysts say FRC action threatens years of progress in FG’s financial sector reforms

The Financial Reporting Council of Nigeria (FRCN), a quasi parastatal believed to be under the supervision of one-time managing director in Goldman Sachs’ London office and Nigeria’s current minister of industry, trade and investments, Olusegun Aganga, is now being watched by the international finance and investment community as it opens today, what is

being described as ‘a very peculiar’ investigation.

The outcome of this may turn out to be a referendum on the far reaching progressive reforms already made in the country’s financial services sector, especially with respect to the long closed mergers and acquisitions that saved millions of savers from losing their money.

“This indeed, might just be a referendum on the rule of law in Nigeria,” was how one keen observer put it yesterday, when asked what she thought was going on with the FRC action.

The FRCN (not to be mistaken for the Federal Radio Corporation of Nigeria) opens its offices today and at 11 am, will begin a two-day sitting in what it called in an advertisement in major Nigerian newspapers on Monday, “on-going investigation of Central Bank of Nigeria”, but to which it has invited the former managing director of defunct Intercontinental Bank, Erastus Akingbola, who was in 2011 convicted for fraud by a London court and is currently facing prosecution for fraud by the Federal Government that the FRC purports to represent, through the Economic and Financial Crimes Commission (EFCC). The Security and Exchange Commission (SEC) and the British courts still have cases pending against him.

Akingbola has an age-old petition written in 2010 that had long been dismissed, but which now appears to have been resurrected by the FRC, which the Act setting it up ascribed its core remit as maintaining accounting standards in the country.

Apart from Akingbola, the Council has invited immediate past and current chief executive of Access Bank, Aigboje Aig-Imoukhuede and Herbert Wigwe respectively. Along with Akingbola and three others, they are to appear before an investigative panel today.

One question that continued to echo from different analysts, is why the FRC is trying to stand on the petition of Akingbola, which had long been dismissed, especially when it is from a man who is still being prosecuted by government bodies, and who has an existing conviction by a London court for fraud perpetuated while managing director of the now defunct Intercontinental Bank.

“Why should his petition cause any change in the way the FRC now sees things?” asked an Abuja based economic analyst.

“The Financial Reporting Council of Nigeria (FRC) is currently investigating the activities of the Central Bank of Nigeria (CBN) for financial years ended December 31, 2011 and 2012,” it said in the invitation made public by the advertisement.

It then added that “this investigation includee related matters arising from transactions and events which impacted on the said 2011 and 2012 from earlier years and have implications for later periods.”

There are concerns by analysts who wished not to be identified because of their involvement in the financial markets in Nigeria why the Council is inviting individuals in matters that are purely corporate.

A number of foreign analysts who spoke to BusinessDay last night said they were curious to see what the outcomes of the FRCN investigation would be, especially because of the huge implication it could have for the credibility of Nigeria over any claims to the pursuit of economic and financial reforms and the expectation that it be trusted in future.

They say that it could lead to a crisis of confidence and threaten Nigeria’s risk rating, which she’s been trying to defend vigorously.

“There is growing suspicion that the FRCN’s action may be trying to unravel a very successful M&A (merger and acquisition) process that took place in Nigeria’s banking sector which helped protect customers savings ,” suggested one New York based emerging market analyst.

The interest being shown by international investors is driven by the fact that many of them hold positions in the banks that emerged after the M&A exercise. “Whatever happens is likely to lead to a spate of litigations by foreign participants in the Nigerian banking M&A exercise,” said a senior Nigerian financial analyst.

Many believe that Akingbola’s concerns are better addressed by the courts. “You can question an M&A in court. But also recall that these were mergers and acquisitions that were endorsed by Nigerian courts and by high political offices, including up to the level of the Presidency.

“International advisers worked on these M&As. So is the FRC trying to look into this to find out if all these lines of endorsement were wrong?” asked the analyst.

“The FRC action may unwittingly bring this whole process to a serious crisis,” said someone familiar with the process that took over two years of diligent execution.

Indeed the FRC may be fishing in uncharted territories, which could expose its leadership as acting out a script. Some London based Africa economists said it would be interesting to know on whose interest the FRC is acting out this script. Last night, for instance, BusinessDay gathered that the investigation, which is largely administrative, may have been set up to open up a gap for the erstwhile managing director of the defunct Intercontinental Bank to secure an administrative decision that could help him continue to pursue his claim to the bank which no longer exist.

It may seem that the FRC has not looked at what Akingbola did at Intercontinental Bank, which is why many are surprised that this is happening now. Besides, this position is being reinforced by the fact that these were purely private sector transactions, for which the courts are open to seek any redress.

Last night analysts said that the FRC ought to be stopped now before this gets too far. Private sector expectation is that the President would wade in, especially as the supervising minister,

BY OUR REPORTER