• Thursday, March 28, 2024
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FRCN confirms Nedbank position that Ecobank faces no investigation

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Unless proven otherwise, the statement of the chief operating officer of South Africa’s Nedbank on Ecobank should be taken as truth, Daniel Asapokhai, executive secretary/CEO of Financial Reporting Council of Nigeria (FRCN), said Friday.

Mfundo Nkuhlu, chief operating officer of Nedbank, which owns 21 percent of the Togo-based lender, said Friday that Ecobank is not under investigation in Nigeria.

“Unless you disbelieve them (Nedbank) and you have the basis to prove otherwise. But if they are under investigation, we will get the notice out to the public in line with our processes. Whenever we have anybody under our investigation, we will not make it secret,” Asapokhai told BusinessDay on phone.

A social media report that Nedbank’s West African associate was subject to an investigation by Nigeria’s accountancy regulator spooked investors sensitive to any prospect of costly fines in the country, driving down Nedbank’s share price by more than 4 percent.

The report said to be “wrongful” had alleged that the investigation related to allegations that Ecobank had overstated its balance sheet and income statement by applying incorrect exchange rates.

Ecobank had in a notice at the Nigerian Stock Exchange allayed the fears of any of its shareholders, creditors, and other stakeholders resulting from the unfounded allegation contained in the said publication.

At the time of the report last month, both Ecobank and Nedbank said they had not been notified of any inquiry. On Friday, January 11, 2019, Nkuhlu said Ecobank’s discussions with the regulator since then suggested there is no investigation.

“Ecobank Transnational Incorporated management have advised, based on their interaction with the Financial Reporting Council of Nigeria, there is no investigation under way into the previous reporting of ETI’s annual financial statements,” he said in an emailed statement.

“We can confirm to all stakeholders that there were no misstatements in our financial statements as alleged in our financial statement for the year ended December 31, 2017 nor in our three quarterly reports released during the 2018 year,” Ecobank said in a statement dated December 19, 2018 and released at the Nigerian Stock Exchange on January 7, 2019.

“We also note that this unfounded allegation was made by a former employee of the Group who is currently in court claiming payment of 13 years’ salary for an alleged unlawful termination of his employment contract,” it said.

The deterioration of the Naira in 2016 led to the creation of different windows for various segments of the economy leading to foreign currencies being traded in these markets/windows at different rates, thus resulting to a multiple exchange rate system in Nigeria.

The existence of multiple FX markets with different exchange rates as well as the accessibility to such markets necessitates the review of the appropriate exchange rates that entities should use in accounting for and reporting their foreign currency transactions as well as foreign investments into Nigeria under International Financial Reporting Standards (IFRSs).

International Accounting Standards (IAS) 21, ‘The effects of changes in foreign exchange rates’, requires that a foreign currency transaction should be recorded at initial recognition in the functional currency using the spot exchange rate at the date of transaction (IAS 21, paragraph 21). IAS 21 paragraph 8 defines the spot exchange rate as the exchange rate for immediate delivery. Where a country has multiple exchange rates, an official quoted rate should be used as the spot rate.

Nigeria currently has multiple exchange rates and judgment is required to determine which exchange rate qualifies as a spot rate that can be used for translation under IAS 21.